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Huebner, Grover Gerhard 


Agricultural commerce 


New York 



Q5 -61^57-1 






Huebner, Grover Gerhard. 

Agricultural commerce ; the organization of AUTOTK 
commerce in agricultural commodities, by Grover G^ 
Huebner . . . New York [etc.] D. Appleton and company^ 
-1915: 1919* 

xiv p., 1 1., 406 p. incl. maps, forms, fold. form. 19i"". ($125 ^ 
Contains bibliographies. 

1 produce trade— U. S. 2. Farm produce— Marketing. 3. Agriculture— 
U. S: 4. U. S.-Comm. i. Title. '"iS— 25493 

Library of Congress ^ HD9006.H8 1915 . 

— Copy 2. 

Copyright A 416484 















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MAIN ENTRY: Huebner. Grover Gerhard 

Agricultural commerce 

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X Page(s) or voiume(s) filmed from copy borrowed from: University of Vermont and — 

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Assistant Professor of Transportation and Commerce* 

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University op Pennsylvania 




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Printed in the United States of America 






I'he purpose of this volume is to describe the commerce of 
the United States in agricultural products, special attention 
being given to those phases of trade organization which have 
to do with the distribution of farm commodities from pro- 
ducer to consumer. Its scope is more fully outlined in Chap- 
ter I. It is especially designed to serve as a textbook for 
colleges and universities, much of the information contained 
in it having been compiled for use in a course dealing with 
the Organization of American Commerce, which the author 
has conducted at the University of Pennsylvania since 1908. 

I desire to acknowledge with many thanks my obligations 
to the various state and federal government officials and offi- 
cials of grain, cotton and other exchanges, elevator, insur- 
ance, grain dealing and other business concerns which have 
courteously provided me with forms and other information. 

I wish especially to thank Dr. Emory E. Johnson, Pro- 
fessor of Transportation and Commerce at the University of 
Pennsylvania, for reading the proof of the volume and offer- 
ing many valuable suggestions during the course of its prep- 
aration. I am also indebted to my brother. Dr. S. S. Hueb- 
ner. Professor of Insurance and Commerce, University of 
Pennsylvania, for suggestions concerning the chapters deal- 
ing with insurance and speculation, and to Mr. Kobert Kiegel, 
Instructor in Insurance and Commerce, University of Penn- 
sylvania, for assistance in proofreading and for preparing 

the index, 

Grover G. Huebner. 






Production and distribution distinguished, 1 — Commerce 
defined, 2— Study of commerce in agricultural products 
subdivided, 3— Plan of treatment, 4 — General classifica- 
tion of agricultural crops, 4: The primary crops, 5— 
Livestock on farms, 8 — Animal products produced on 
farms, 8. 


Classification of agricultural markets, 12: Growers' local 
markets, 12 — Central wholesale markets, 13 — Secondary 
wholesale markets, 15— Retail markets, 16 — Classification 
of marketing processes, 16: Growers' Sales, 17— Local 
dealers' sales, 19— Central market trade organization, 19 
— Secondary wholesale market transactions, 22 — Retail 
sales, 23— Consumers' purchases, 24 — Exporting and im- 
porting methods, 25. Agricultural export methods, 25— 
Agricultural import methods, 26. 

KET • • * • 

Functions of country elevators and warehouses,- 29 — Geo- 
graphical distribution of the local grain trade, 30: Dis- 
tribution of local wheat trade, 30— Distribution of local 
corn trade, 32 — Distribution of local trade in oats, 34 — 
Distribution of local trade in barley, 36— Transfer of 
grain from grower to country elevator or warehouse, 36: 
Length and cost of local haul, 36— Methods of local haul- 
ing, 37— Description of country elevators, 38— Management 
of country grain elevators, 40: Classification of country 
elevators, 40 — Line elevator companies, 40 — Local grain 
dealers' elevators, 43— Farmers' cooperative elevators, 
44 — The local grain market in the Pacific Coast region, 
46: Local purchasing by exporters, 46— Handling of grain 
in sacks, 47— Relative absence of country elevators, 48— 
Cooperative growers' associations, 48— Price-quoting sys- 
tem, 48. 










The flow of the grain trade, 50: The system of grain 
markets, 50 — Geographical location of primary markets 
51 — The volume of business at the primary markets, 54-^ 
Competition between primary markets, 55 — Functions of 
primary markets, 56 — Shipping routes, 56— Milling-in- 
transit, 59— The seaboard markets, 60— Activities and man- 
agement of terminal elevators, 61 : The functions of ter- 
minal elevators, 62 — Construction and capacity of termi- 
nal elevators, 62 — Elevator ownership, 63 — Regulation by 
the states, 65 — Regulation by grain exchanges, 74 — Fed- 
eral regulation, 78— Sources of elevator profits, 78 — The 
purchase and sale of grain at the primary markets, 83: 
The purchase of grain from country elevators, 84 — The 
sale of grain stored in terminal elevators, 86 — ^Factors 
influencing grain prices, 88. 


The cotton-growing belt, 94: Commercial and geographi- 
cal classification, 95 — World's production of cotton, 98 — 
The local handling and shipment of cotton by growers, 
100: Ginning and baling, 100 — Local storage and haul- 
ing, 102 — Sale of cotton by the grower, 103: Sale to 
local merchants, 104 — Sale to exporting houses and cotton 
brokers, 105 — Sale to southern mills, 106 — Consignment to 
cotton factors, 107 — Sale to foreign buyers, 108 — The cot- 
ton-growers' unions, 108 — The determination of the 
growers' prices, 110. 


Supply and distribution: Cotton exports, 116 — Shipments 
to northern mills, 118 — Consumption by southern mills, 
118 — Direct shipments, 119: Marking and tagging, 119 
— Compressing flat bales, 120 — Through bills of lad- 
ing, 121 — Cotton insurance, 121 — Interior points of concen- 
tration, 122 : Sources of supply, 123 — Functions, 123 — Ex- 
tent of competition, 123 — ^Purchase of cotton from grow- 
ers, local merchants and factors, 124: Cotton receiving, 
ports, 125 : Functions of receiving port, 126 — Sale of cot- 
ton to domestic mills, 126: Manner of sale, 126 — Terms 
of sale, 127 — Time of sale, 128— Sale of cotton in foreign 
markets, 129 : Methods of sale, 129 — Terms of sale, 130 — 
The making of cotton prices, 131: Spinners' and impor- 
ters' prices, '131 — The factors affecting future and central 
market prices, 133. 





UCE 136 

Organization of speculative produce exchanges, 137: 
Speculative grain exchanges, 137 — Speculative cotton ex- 
changes, 138 — Corporate and business organization, 138 — 
Future contracts, 140: Definition of future contracts, 
140 — Cotton futures are basis contracts, 145 — Cotton 
grade differences, 146 — Grain futures are basis contracts, 
148 — Short selling, 149 — Manner of delivery, 149 — Legal- 
ity and binding nature of futures, 150 — Bucket shops, 
151 — Options, 151 — Functions of speculative exchanges in 
the sale of spot produce, 151: Speculative exchanges as 
spot markets, 152 — Speculative exchanges provide a con- 
tinuous market, 153 — Speculative exchanges collect and 
disseminate trade information, 154 — Speculative exchanges 
tend to establish world prices, 154 — Future contracts as a 
means of insuring trade profits, 155 — Effect of specula- 
tion on spot prices, 160. 


Geographical classification of livestock trade, 164: The 
; cattle-growing districts, 164 — The hog-raising area, 167 — 
The sheep-growing districts, 167 — General magnitude of 
livestock industries, 168 — ^Volume of annual livestock 
trade, 170 — Shipping from local points to central markets, 
170: Railroad equipment, 171 — ^Livestock contract, 
171 — Transportation charges, 172 — ^Public regulation, 
173 — ^Local inspection of livestock, 174 — Methods of sell- 
ing livestock, 177: Sales through central commission- 
men, 177 — Cooperative livestock shipping associations, 
178 — Sales to local livestock dealers, 179 — Sales to local 
slaughterers and retail butchers, 179 — ^Private sales to 
packers, 179 — ^Private sales to feeders, 179. 


Central market receipts, 181 — Central market competition, 
182 — Shipment from central markets, 185 — Relative im- 
portance of packers and wholesale slaughterers, 186 — 
Functions of central markets, 186 — Organization and 
description of central markets, 187: The stockyards, 
187 — Livestock exchanges, 188— Sales at the stockyards, 
189 — Marketing costs, 190 — Livestock and meat inspection 
at central markets, 191 — ^Livestock prices, 197. 










Supply and distribution of wool, 202: Wool production 
m the United States, 202-Imports of foreign wool. 
j04__Competition between domestic and foreign wool 
207— Reasons for extensive imports of wool, 208— Distri- 
bution by industries, 211— Central wool markets 212- 
The eastern markets, 212-<:!entral western mkrkets" 
213—1-30160 Coast markets, 214— Functions of central 
wool markets, 214— The local purchasing of wool 215- 
Purchase from American growers, 215— The purchase of 
imported wool, 217— Wool prices, 218. 


Leaf tobacco districts and types, 222: Commercial 
classes and types, 222— Leaf tobacco districts, 223— Meth- 
ods of selling leaf tobacco in the United States, 228- 
Sale of cigar types, 228— Sale of smoking, chewing, snuff 
and export leaf, 230— Southern leaf tobacco markets 
233— Southern leaf buyers, 234— Foreign trade in leaf to- 
bacco, 235 : Leaf tobacco exports, 235— Leaf tobacco im- 
ports, 235 — ^Leaf tobacco prices, 235. 





Government crop reports, 294: Purpose of government 
crop reports, 294 — Organization of crop-reporting service 
of Department of Agriculture, 295 — Scope of crop reports 
of Department of Agriculture, 298 — ^Returns of United 
States Census Office, 299 — United States Bureau of For- 
eign and Domestic Commerce, 301 — State reports, 301 — 
Crop reports of private organizations, 301: The visible 
supply, 301 — Other privately collected crop information, 302. 


TIES 308 

Rural crop insurance, 308 — Sources of rural insurance, 
310 — Insurance as the basis of commodity loans, 311 
^The insurance of stored commodities, 313 — Insurance 
of commodities in mills, factories and mercantile estab- 
lishments, 314 — Insurance of commodities en route, 315: 
Insurance of railroad shipments, 315 — Insurance of marine 
cargoes, 317 — Insurance the basis of financial settlement, 


The fruit-growing districts, 239: Orchard fruits, 239— 
Small fruits, 240— Grapes, 242— Citrus fruits, 242— Non- 
citrous tropical and sub-tropical fruits, 242— Importation 
of fruits, 243— Preparation for market, 244 : Fruit grad- 
^ ing, 244— Fruit packing, 245— Pre-cooUng, 246— Shipping 
fruit to market, 246: Refrigeration car service, 246— Fruit 
markets, 247— Fruit exports, 249— Fruit warehouses, 249— 
Methods of marketing fruit, 250: Distribution in whole- 
sale markets, 250— Retailing of fruit, 254— Fruit grow- 
ers' cooperative associations, 255. 



Functions of inspection and grading, 259— The inspection 
and grading organization, 261— Inspection and grading 
of grain, 262 : Illinois grain inspection service, 262— Fac- 
tors determining grades of grain, 267— The grades of 
grain, 268 — Cotton grading and inspection, 270: Cotton- 
grading factors, 271— Cotton grades, 273— Commercial 
classifying and grading of livestock, 285: The grading 
of wool, 287 — ^Leaf tobacco grades, 290. 





Rural credit, 327: Long-term mortgage credits, 327 — 
Short-term rural commercial credits, 328 — Short-comings 
of farm credits, 329 — Dealers' loans on produce, 332: 
Loans on grain, 332 — Cotton loans, 333 — ^Leaf tobacco and 
wool loans, 333 — Cold storage warehouse loans, 334 — The 
place of hedging in crop financing, 334 — Methods of 
financial settlement, 335: Domestic settlements, 335 — 
Settlement of agricultural exports and imports, 336 — The 
seasonal flow of crop-moving funds, 338. 


Wholesale prices, 341: Price index numbers of agricul- 
tural products, 342 — Index numbers of general wholesale 
price levels, 343 — Wholesale price factors, 347: The gold 
production theory, 347 — The forces of supply and demand, 
350 — Speculation in farm products, 354— Manipulation 
and corners, 355 — Combination and consolidation, 356 — 
Cold storage, 357 — Transportation charges, 358 — Commer- 
cial costs, 360 — American import duties, 360 — General 
business conditions, 362 — Growers' local prices, 362 — ^Re- 
tail prices, 364. 




ENCES 3^^ 

Historical development of agricultural exports, 368: 
Prior to the Treaty of Ghent, 368— The period 1815-1818, 
369— The period 1818-1830, 369— The period 1830-1836, 
370— The period 1836-1845, 370— The period 1846-1860, 
370— The Civil War era, 371— The period 1865-1900, 372— 
Recent developments of agricultural exports, 374— Foreign 
markets for agricultural exports, 376: European mar- 
kets, 376— Non-European markets, 378— Agricultural ex- 
port trade influences, 378: Favorable influences, 378— 
Unfavorable influences, 380— The agricultural imports, 
381 : Effect of agricultural imports on American farmers, 

Appendix— United States Cotton Futures Act 
Index ••••••• 


* II 


Value of All Primary Crops (1909) 

Value of Domestic Animals on Farms • 

Wheat Districts and Central Grain Markets . . . 

The Corn Belt ^r *i ' 

Territorial Competition Among Primary Grain Markets 

The Cotton Belt, 1913-1914 • • 

Beef Cattle Districts and Central Livestock Markets . 

Sheep-Growing Districts 

Location of Range Country 

Leaf Tobacco Districts • 

Orchard Fruits . , , . • t t • • • • 


















Production and Distribution Distin^shed.— In agricul- 
ture as in other industries production and commercial distri- 
bution, although closely interrelated, are essentially distinct 
processes. The former has reference to the growth of the 
country's farm products ; the latter to their sale and distribu- 
tion from the grower to the consumer. So clearly has this 
distinction been maintained in the farming industries that for 
many years the term "agriculture," in the absence of specific 
definition, was generally synonymous with agricultural "pro- 
duction." Gradually, however, it is being realized that agri- 
culture depends as much upon the successful commercial dis- 
tribution of the crops as upon their successful production. 
Many growers confine their activities largely to the produc- 
tion of farm products; others, in, addition, pay much atten- 
tion to the marketing of their crops; and there are many 
dealers, transportation agencies, warehousemen, and other 
trade interests engaged in the distribution of farm com- 
modities, whose activities are purely commercial. No matter 
by whom these services are performed, the production and the 
distribution of farm products are separate services and both 
are of unquestioned importance. 

In discussing the commerce in farm products it is not 
necessary to deal with soils, seed selection, planting, cultiva- 
tion, fertilizers, crop rotation, farm labor, production costs, 
crop pests and animal diseases, harvesting methods, feeding, 
Uvestock breeding, farm machinery, land rents and similar 



phases of agriculture ; for such matters constitute agricultural 
production. They need to be mentioned only in so far as they 
exert an indirect influence upon agricultural prices. Subse- 
quent chapters will be confined exclusively to the commercial 
phases of agriculture. 

Commerce Defined. — Various terms are almost indiscrim- 
inately applied to the distribution of products from producer 
to consumer. Some refer to it as "commercial distribution/' 
some prefer "marketing," and others "commerce.^' Any of 
these terms readily lends itself to the following concise defini- 
tion of commerce: "Commerce consists of the exchange of 
commodities between separated localities — it is the agency by 
means of which consumer and producer are brought together. 
The process involves the sale and purchase of goods, their 
transmission from the seller to the buyer, and the settlement 
of business accounts.^' ^ Whatever term is preferred in de- 
scribing the commercial phases of agriculture, it is essential 
to interpret its meaning broadly so as to exclude all those 
which are primarily related to the production or growth of 
farm products and to include all those which have to do with 
their distribution from grower to consumer. 

Study of Commerce in Agricultural Products Subdivided. 
— In order to facilitate discussion the study of the commerce 
in farm products may be subdivided as follows : 

1. The geographical location of producing districts, in- 
cluding a statement of the volume and value of crops pro- 
duced and the proportion reaching the country's markets. 

2. The location and classification of different types of 
agricultural markets, competition within and between mar- 
kets, and market conditions or influences. 

3. The trade organization or methods of purchase and 
sale, including a description of (a) the various kinds or 
groups of buyers and sellers, (b) their methods of buying and 
selling, (c) the organization and functions of exchanges, (d) 
the uses and workings of warehouses, elevators, yards or mar- 
ket-places where farm products may be stored or marketed, 
and (e) cooperative trade activities of growers. 

* E. B. Johnson : American Eailway Transportation, p. 4. 


4. The transportation or shipping organization, includ- 
ing the hauling of farm products from farm to local market or 
shipping point, and their transportation from local points to 
more distant domestic and foreign markets, over rail and 
water transportation routes. 

6. The inspection, classification and grading of farm 

products. • • t. 

6. The control or regulation of commercial distribution by 
public authorities and by organized exchanges, boards of trade 
or other commercial bodies. 

7. The relationship between speculation and the trade m 

farm commodities. 

8. The collection and di'ssemination of trade information. 

9. Local wholesale and retail agricultural prices, price 
factors or influences, and methods of determining and quoting 


10. The cost incurred in the commercial distribution of 

agricultural crops. 

11. The relationship between insurance and the com- 
merce in farm commodities. 

12. The financing of the agricultural crops. 

The transportation or shipping service mentioned above 
is one of the most important parts of the entire machinery of 
commerce as a whole, but as it has been described elsewhere 
in great detail,^ it is not intended to discuss in this volume 
the methods of making freight rates, general transportation 
services, or transportation as an industry. It is essential, 
however, to include various phases of transportation, such as 
the relation of freight charges to marketing costs, trade 
profits, and prices ; rail and water routes for particular crops ; 

'See especially E. E. Johnson and G. G. Huebner: Railroad 
Traffic and Rates (1911) ; E. R. Johnson: American Railway Trans- 
portation (1908); W. Z. Ripley: Railroad Rates and Regulation 
(1912): Logan McPherson: Railroad Freight Rates (1909); W. A. 
Trimpe: Freight Claims (1913); J. F. Morton: Routing Freight 
Shipments (1913); E. R. Dewsnup: Freight Classification (1913); 
E R. Johnson: Ocean and Inland Water Transportation (1906); 
B O Hough; Ocean Traffic and Trade (1914); and House Commit- 
tee on the Merchant Marine and Fisheries, Steamship Agreements 
and Affiliations, VoL iv (1914). 



in-transit, reconsignment or diversion privileges; specialized 
equipment; various special transportation services and prac- 
tices; and the costs of hauling the crop from the farms to 
local markets or shipping points. 

Plan of Treatment. — A certain degree of uniformity pre- 
vails throughout the commercial distribution of the various 
crops, thus facilitating the general description of many of 
the above-mentioned subdivisions. In some respects, however, 
there is such wide divergence in practice that the detailed 
study of commerce in selected commodities becomes essential. 
Various phases of commercial distribution are discussed in 
subsequent chapters, for the agricultural crops as a whole, 
while at the same time special chapters contain descriptions of 
the commerce in the cereals and in cotton, livestock, wool, leaf 
tobacco, and fruit. These particular crops were selected be- 
cause of their great volume and because they are of special 
importance from the standpoint of trade methods or com- 
mercial organization. 

The country's crops of hay and forage, farm dairy products 
and eggs likewise have a huge money value, but they are less 
typical of agricultural trade methods because a large propor- 
tion of these groups is retained for consumption on the farms, 
a smaller share reaches the great wholesale markets for system- 
atic organized distribution, and the huge local trade in them 
does not require detailed description. Vegetables are also an 
agricultural crop of vast importance, but the manner in which 
the commerce in most of them is conducted is so like that 
which prevails in the fruit trade that separate description of 
both is scarcely warranted in a volume of limited space.^ 
Dressed meat and meat products produced on the farms, as 
distinguished from livestock, require but brief mention, for 
most of them are either consumed on the farms or are sold 
in nearby markets for local consumption. 

General Classification of Agricultural Crops.— Although 
the commerce in farm products is directly concerned only with 
those which actually reach the agricultural markets, it is indi- 
rectly concerned with the total crops annually produced. The 

* The Marketing of Fruit, chap. xi. 



entire volume of the country's crops cannot be stated in a 
single aggregate because they comprise a wide variety of prod- 
ucts which are not measured by a common unit or standard. 
It is also difficult to estimate accurately their entire net value. 
So much grain, for example, is fed to livestock and poultry 
that an addition of the values of grains, livestock on farms, 
country dairy products and eggs would merely result m a 
gross value containing flagrant duplications. The United 
States Census Office in its latest report has attempted 
no statement of an aggregate net volume or value, but 
confined its returns to a separate description of three lead- 
ing groups of farm products. A brief review of the latest 
census returns will serve as a general measure of the vast- 
ness of the agricultural trades. Official statistics showing the 
value and volume of most of the country's crops are available 
for later years and many are presented in subsequent chapters, 
but complete returns including all farm commodities are not 

currently compiled.^ j • x i. 

1, The Primary Cro^s.— The term "crops" as used m the 
census returns includes only the cereals, hay and forage, cot- 
ton, leaf tobacco, vegetables, fruits and other commodities in- 
cluded in Table No. I. These products are often referred to 
as the "primary crops," because they are fundamental and 
constitute the basis for most of the remaining farm products. 
The value of all the primary crops of the United States m the 
census year 1909 was reported to be $5,487,000,000-a per 
capita value of nearly $60. Their total value was 83.1 per 
cent in excess of what it had been a decade earlier, but this 
was due mainly to an increase of 66.4 per cent, in their aver- 
age price. On the basis of the prices which ruled m 1899 the 
value of these crops in 1909 would have been but 10 per cent, 
higher than it was a decade earlier, and this represents the 
real advance in primary crop production.^ 

^See U. S. Department of Agriculture, Year Books (1910-1912) : 
U S Bureau of Crop Estimates (Formerly Bureau of Statistics), 
Farmers' Bulletins Nos. 570, 575, 584, 629, 651, 665; U. S. Census 
Office Bulletins Nos. 125, 128. 

» Thirteenth U. S. Census, Agriculture, vol. v, p. 5iJb. 





Total Value of Primary Agricultural Crops* » 



Cotton and cottonseed . . 

Hay and forage 


Fruits and nuts 

Forest products of farms. 

Leaf tobacco 

Minor grains and seeds. . 

Sugar crops 

Flowers and plants 

Nursery products 

Other minor crops (hemp 
hops, etc.) 





























Per Cent. 





* (Thirteenth U. S. Census 1910, Agriculture, vol. v. p. 532.) 

The value of the primary crops in diiferent parts of the United 
States IS graphically shown in Map No. I. 

A large proportion of many of these crops enters the com- 
merce of the United States, not directly, but indirectly in the 
form of cattle, sheep, hogs, horses, and other farm animals; 
and poultry, eggs, country butter, milk, cream, and other 
country dairy products. A portion is also retained locally for 
final consumption and for seed. In 1914, for example, 39 3 
per cent, of the wheat crop was not shipped out of the coun- 
ties m which It was grown and similar proportions for other 
leading primary crops were as follows : corn 81.4 per cent 
oats 80.6 per cent., and barley 54.9 per cent. Corn, oats, bar- 
ley and hay are commonly known as the "feed crops" and the 
United States Bureau of Crop Estimates has stated that dur- 
ing the ^Ye years ending in 1914, 85.6, 72, 47 and 83 per 
cent, respectively were used on farms for food and seed pur- 
poses.* In the case of some primary crops, however, such as 
cotton and leaf tobacco, but little is retained locally, the 

* Farmers' Bulletin, No. 629, p. 8. 




^. Livestock on Farms.— A second group of affrieultuml 
products consists of 'livestock on farms/' thVtoS value oJ 

Horses valued at over two billion dollars constituted the larg- 
est item an this huge aggregate, yet they are usually of less 
impor ance in the livestock markets than the meat-producing 
animals because vast numbers of them are raised for use on 
the farms rather than for sale in distant markets. Many 
horses and also mules are sold in the livestock markets 
throughout the United States but the commerce in iSock 

The total value of all the domestic animals sold during the 

$1,563 000,000. The census returns also include poultry the 
value of fow s on the country's farms on April 15, 1910, being 

tTZ. the census year 1909 at $303,506,000. Livestock on 
farms constitutes mamly a secondary agricultural crop for it 
s m a large measure dependent upon the primary crops for 
Its food supply. The geographical distribution of its total 
value IS graphically shown in Map No. II. 

S. Animal Products Produced on Farms.— A third im- 
portant group of agricultural crops-also secondaiy-<3onsists 
of livestock products produced on farms. The total annual 
value of the country's dairy products exclusive of milk and 
cream consumed on the farms exceeds $600,000,000 Their 

!ooonn ' '/°f ?:''^ "^'^^ '^^'' ^ ^^^ '^^^^ of $252,- 
400,000 country butter valued at $232,800,000, butter fat in 

terms of which much milk and cream are sold to cheese and 

butter factories amounting to $82,300,000, sales of cream 

amounting to $32,600,000 and smaller amounts of country- 

made cheese.^ Butter, cheese and condensed milk valued at 

• Thirteenth V 8 Census, Agriculture, vol. v, p. 327. 
'See chapa. viii, ix. , r •""• 

• Thirteenth U. S. Census, Agriculture, vol. v, p. 474. 




$274,500,000, moreover, were produced in factories, but such 
dairy products are virtually manufactures and are marketed 
differently from agricultural products. Other livestock prod- 
ucts of great importance in the commerce of the United States 
are eggs, which were in the census year 1909 valued at 
$306,689,000, meat animals slaughtered on farms valued at 
$270,239,000, wool and mohair at $66,374,000, and honey and 
wax at nearly $6,000,000. 

Foreign Commerce in F^rm Products.— While the com- 
merce in American farm products is mainly domestic they also 
constitute the basis for a huge export trade, and although the 
United States is the world's leading agricultural country, 
astoundingly large quantities of farm products are imported 
from abroad. In 1913 the agricultural exports of the 
United States, including prepared foodstuffs derived from 
farm products, were valued at $1,123,000,000, and agricul- 
tural commodities valued at $815,000,000 were imported from 
foreign countries. Few phases of the commerce in the agri- 
cultural crops are of greater interest than the developments 
which are taking place in the country's international trade.^ 


The principal sources of information are appended to sub- 
sequent chapters, but the following may be consulted in con- 
nection with the commerce in such crops as are not hereafter 
described in detail: 

*JoHNSON, E. R. History of the Domestic and Foreign Com- 
merce of the United States (1915), 2 Vols. 
*McPherson, Logan. Railroad Freight Rate in Relation to the 
Industry and Commerce of the United - States (1909), 
chaps. 3, 4, 5. 
*Seibels, W. T. Produce Markets and Marketing (1911). 
*SuLLiVAN, J. W. Markets for the People (1913). 
*Weld, L. D. H. "Studies in the Marketing of Farm Prod- 
ucts," University of Minnesota Studies in the Social 
Sciences, No. 4 (Feb., 1915). 
United States Bureau of Crop Estimates: Miscellaneous crop 
statistics. The Agricultural Outlook (1913 to Apr., 1915). 
^See chap. xviiL 



United States Bureau of Crop Estimates: The Monthly Crop 

Report (May, 1915, and monthly ^^^J^^^^^\...y 
, -The Productions and Consumption of Dairy Products, 

Farmers' Bulletin No. 177 (Feb. 15, 1915). 
United States Bureau of Foreign and Domestic Commerce: 

"Utilization of Potatoes in Europe," Special Consular 

Reports No. 64 (1914). 
United States Bureau of Labor Statistics: /'f f^^^^^.f ^^^^^' 

from Producer to Consumer," Bulletin 164 (1915). 
"Sugar Prices from Producer to Consumer, Bulletin 121 


United State; Bureau of Statistics: "CoftofP'odu^g Min- 
nesota Dairy Products 1904-1909," Bulletin 88 (1911). 

"Hay Crops of the TTnited States, 1866-1906," Bulletin 

No. 62 (1908). ^ „ ^. , „, 

, "Hop Crop of the United States, 1790-1911," Circular 35 


"Hops'in Principal Countries," Bulletin No. 50 (1907). 

^Totato Crops of the United States 1866-1906," Bulletin 

-^icf Crop^ of the United States, 1712-1911," Circular 

United s'tates Census* Office: Thirteenth Census, 1910, Agricul- 
ture, Vol. Y (1913). \c 1 .• J^crcr. 

♦United States Department of Agriculture: Marketing Eggs 

by Parcels Post (1914). 
♦ ^Year Book 1912, for special papers on poultry, eggs and 

vegetables (1913). . 

-Year Book 1910, for special papers on cream, cheese and 

♦United States Industrial Commission: The Distribution and 
Marketing of Farm Products, Vol. YI (1901). 

"The Cost of Living," The Annals of the American Academy 
of Political and Social Science (^^^^ }^^^]' ■ , ., 

♦"Reducing the Cost of Food Distribution," The Annals of the 
American Academy of Political and Social Science 

(Nov., 1913). 

* Bef erences designated by * apply also to chap. ii. 




The number of trade interests engaged in the distribution 
of the agricultural crops of the United States is so large, their 
marketing conditions so diverse, and the area throughout 
which they are produced and distributed so extensive that no 
all-inclusive system of agricultural markets and of trade or- 
ganization has been universally adopted. Yet the various 
agricultural trades have much in common, and, subject to 
certain exceptions, a general system of markets and general 
marketing processes are traceable. 

Classification of Agricultural Markets 

In their flow from grower to consumer, agricultural com- 
modities usually pass through one or more of four types of 
markets: (1) the growers' local market, (2) the central whole- 
sale market, (3) the secondary wholesale market, and (4) the 
retail market. In many instances commodities pass through 
the entire system or chain of markets while in others the dis- 
tribution is more direct. 

The actual markets of these various types are located at 
different points, and some are important general markets for 
many crops while others are of special importance in the mar- 
keting of but a single farm commodity. The principal mar- 
kets for numerous farm products will be described later in 
dealing with the trade in particular crops. 

Grawers' Local Markets.— Although the growers of agri- 
cultural products frequently ship their crops direct to large 
central markets, so many sell to local buyers that thousands of 



local markets have sprung up throughout the farming dis- 
tricts. These markets are the places of business of vast num- 
bers of local dealers of many types who stand between the 
farmers and the primary and secondary markets, and also of 
numerous local retailers and consumers who purchase for 
local consumption. They are the homes of thousands of local 
grain elevators, warehouses, cotton gins, cotton yards, stock- 
yards, fruit, produce and leaf tobacco packing houses, stores 
and other local mercantile establishments. 

The functions of the growers' local markets vary with the 
nature of the commodity handled, whether the article is pur- 
chased for shipment to outside markets or for local consump- 
tion. They also vary with local trade conditions, but may be 
generally summarized as follows : 

1. Growers' local markets are a medium for gathering or 
collecting large quantities of farm products from the pro- 

2. They provide convenient, nearby wholesale markets 
for growers who do not desire or are unable to ship direct to 
the larger outside markets. 

3. They facilitate shipment to outside markets by pro- 
viding the necessary elevation and loading facilities and con- 
centrating purchases until carload lots are obtained. 

4. They frequently serve as temporary storage places. 

6. They facilitate the initial grading, inspection, weigh- 
ing, packing or other preparation of many farm products 
before they arrive at the central markets. 

6. In some instances they serve as local retail markets 
for growers who are frequently able to sell a portion of their 
crops to local retailers and consumers. 

Central Wholesale Markets.— One of the distinguishing 
features of the agricultural trade organization is that a large 
portion of the country's crops is concentrated in great central 
markets before it is finally sold for consumption. There 
are three principal groups of such markets: (1) the central 
markets of the interior which are variously known as "pri- 
mary markets,'' "interior points of concentration," interior 
wholesale markets, etc.; (2) the "seaboard markets" of the 



Atlantic, Gulf and Pacific seaboards; and (3) the foreign 
central markets to which most agricultural exports are shipped 
for distribution throughout foreign countries. The difference 
between these central wholesale markets is sometimes merely 
a geographical one, but farm products frequently pass through 
or become the basis for trade in both an interior and seaboard 
market before they are finally disposed of, and agricultural 
exports may pass through the entire threefold chain of central 

These central markets are equipped with large terminal 
elevators and warehouses, exchanges, auction rooms, livestock 
yards, rail and water transportation facilities, inspection 
rooms, banking facilities, and all equipment needed for the 
storage, preparation, handling, purchase and sale, insurance, 
shipment and financing of large quantities of farm products. 
Commissionmen, brokers, auctioneers, wholesale dealers or 
jobbers, central distributors, contractors, exporters, importers, 
speculators, elevator and warehousemen, bankers, insurance 
men, ship brokers, inspectors, weighers, freight forwarders, 
trucking agencies and other commercial interests are engaged 
in the wholesale trade which is conducted in these markets. 
Many of them are, furthermore, equipped with numerous re- 
tail establishments and with flour mills, cotton or woolen mills, 
malt houses, meat packing plants, tobacco factories, or other 
consumers of farm products who depend upon the central 
wholesale markets as a direct source of supply. 

The functions of the central markets for farm products 
vary in detail but may be generally summarized as follows : 

1. They concentrate enormous quantities of American 
and in some cases of imported foreign agricultural products 
into a limited number of markets. 

2. They provide continuous cash markets where such con- 
centrated farm products are purchased and sold, in many in- 
stances, in accordance with established trade rules. 

3. They provide extraordinary facilities for long-time as 
well as temporary public and private storage; of farm products. 

4. They expedite the cleaning, scouring, mixing, sorting 
and preparation of commodities which do not arrive in ap- 


proved market condition or such as may yield increased profits 
as a result of such handling. 

5. They greatly facilitate the sampling, handling, in- 
spection, grading, weighing, or other similar trade services 
incident to the organized sale of farm products. 

6. They hasten the collection and dissemination of trade 


7. They facilitate the shipment and distribution of farm 
products to secondary wholesale and to retail markets as they 
are currently needed. 

8. The central markets facilitate the establishment of 
nation-wide, and in some cases of world-wide, prices for many 
of the principal farm products— indeed it is at these markets 
that the wholesale prices of farm products, which underlie 
both growers' and retail prices, are determined. 

9. They promote speculation in farm products and tend 
to confine it to established rules. In the cotton and grain 
trades organized speculation dependent upon the purchase and 
sale of future contracts on some of the exchanges has become 
of widespread importance.^ 

10. Although the central markets are primarily wholesale 
distributing centers many are also centers of consumption, 
having a large population requiring agricultural foods and 
numerous industries dependent upon agriculture for their 
raw materials. 

Secondary Wholesale Markets.— There are many large 
and small markets where farm products are purchased in 
wholesale lots but which differ widely from the central whole- 
sale markets in that they are primarily centers of consump- 
tion rather than shipping and distributing, price-making, 
trading, concentrating or speculative markets. They do not 
regularly perform any of the ten central market functions 
enumerated above except the last-named. 

Such markets may be called secondary wholesale markets, 

for although they at times obtain part of their supply of 

farm products direct from the growers' local markets, they 

are mainly supplied from t he great central markets. All the 

* For uses of organized speculation see chap. vii. 



cities and communities located throughout the United States 
and in many foreign countries to which the central markets 
ship farm products in wholesale lots to be consumed in flour 
and textile mills, cereal manufacturing plants, tobacco fac- 
tories, meat-packing and slaughtering establishments, malt 
houses, etc., or to be distributed by local wholesale and retail 
houses for final consumption, are markets of this kmd. 

Retail Markets.— Some of the principal farm staples such 
as wheat, rye and barley— except for feed purposes— cotton, 
leaf tobacco, meat animals and wool, are not regularly retailed 
in their crude condition. They are more commonly retailed 
after having been converted into manufactured or prepared 
wares such as flour and feed, malt, breakfast- cereals, bakery 
products, textiles, tobacco manufactures, meat and meat prod- 
ucts, the marketing organization of which differs widely from 
that which has been developed in the agricultural trades. 
Other farm products, however, such as fruits and produce, 
eggs, oats, corn, hay, straw, milk and country butter, are 
more generally retailed, and retail markets for them have 
consequently been developed. 

The retail markets in many cases overlap all the other 
types of markets geographically, for farmers may often retail 
a portion of their crops directly in their local markets, and 
wholesale concerns sometimes conduct a retail as well as a 
wholesale distributing business. The retail markets, however, 
are provided primarily by that multitude of small and large 
retail dealers who purchase farm products in the wholesale 
markets or from the growers and distribute them to the con- 
sumers in relatively small lots. 

Classification of Marketing Processes 

The trade interests which purchase and sell farm com- 
modities in the various types of agricultural markets outlined 
above— growers, local buyers, central market dealers, secon- 
dary wholesalers, retailers and consumers— pursue different 
methods, but there is sufficient similarity between the various 




agricultural trades to permit of a general description of their 
marketing organization. 

Growers' Sales.— The producers of farm products usually 
sell their crops either in their local markets or in the central 
wholesale markets. In the former case they may sell to local 
buyers who resell in the central markets, or to local retailers 
or consumers for local consumption. Thus grain growers may 
sell to local dealers of various kinds who operate country ele- 
vators and warehouses, cotton growers to country merchants or 
agents of exporting and brokerage companies, stockmen to 
local livestock dealers, wool growers to local wool dealers and 
agents of central wool dealers or of distant woolen mills, and 
fruit and produce growers to local shippers, distributors, 
brokers, or agents of wholesale jobbers or "line houses." Or 
should they sell for local consumption they may deal directly 
with local feed and seed dealers, local flour and grist mills, 
local textile mills, local butchers, local grocery stores, and 
nearby canneries and manufacturers of prepared fruit prod- 
ucts, or to local consumers of fresh fruit and vegetables. 

Those growers who sell in the central wholesale markets 
may either consign their crops to central commissionmen, 
brokers, distributors or auction companies, or they may sell 
through their own terminal salesmen. The former or con- 
signment trade exceeds the latter in volume, for only a lim- 
ited number of large growers or growers' associations have 
established direct salesmen in distant central markets. Grow- 
ers sometimes ship direct to distant secondary wholesale or 
retail markets but their local and central market sales are of 
predominant importance. 

Growers' sales may be further classified according to 
whether they are made individually or through cooperative 
associations. The larger number of growers sell individually 
but the rapid growth of cooperative associations has become 
one of the features of the agricultural trades. The amazing 
number of cooperative country grain-elevator companies, cot- 
ton growers' unions and warehouse companies, livestock and 
wool-shipping associations, cooperative wool warehouse con- 
cerns, fruit and produce growers' associations, and leaf tobacco 



associations wlilcli have been organized in various parts of 
the United States, are more fully described in later chapters. 
Cooperative marketing is also conducted through a multitude 
of general cooperative stores, cooperative creameries and 
cheese factories, and cooperative potato, poultry and egg ship- 
ping associations. The larger number of growers' associations 
are local concerns which displace or compete with local dealers 
and buyers, and ship to the central markets on consignment, 
but a growing number have taken an additional step in the 
marketing organization by establishing salesmen, agents or 
brokers at the central markets with a view to obtaining maxi- 
mum profits and eliminating terminal commissionmen. Some 
cooperative associations do not actually market the crops of 
their members but exert an influence on individual sales by 
providing trade information, establishing general trade rules, 
facilitating loans, inspection, packing and grading, recom- 
mending standard minimum prices, diversified crops and 
storage, or in oth6r ways more fully described in connec- 
tion with particular crops. 

Growers' sales differ also as to whether they are made at 
the current prices ruling in the local or central markets or at 
contract prices. The former practice, which is the more com- 
mon, constitutes a spot sale ; the latter a future contract trans- 
action. In many cases when a grower contracts to deliver his 
entire crop or specified quantities of potatoes or other vege- 
tables, eggs, milk, wool, leaf tobacco, sugar beets or other 
products at agreed prices, he is "selling short" a crop which 
has not as yet been harvested. 

When selling his products in the central markets, the 
grower's sales may vary according to the place and manner 
of delivery. (1) The grower may sell products "to arrive," 
that is before they have actually arrived at the central market, 
with the understanding that they will be inspected, graded 
and weighed upon arrival and that final settlement shall be 
deferred until such time. (2) He may sell them after their 
arrival but while they are still in freight cars or vessels, such 
sales being variously known as "on track," "in car" or by 
other terms understood in the trade. (3) He may have his. 


products stored in elevators or warehouses to be sold at a 
later date, in which case the transaction is known as an 
"in store" sale. Livestock is similarly sold at the central 
stockyards after the animals have been unloaded from the 
stock cars, although in this case the seller's purpose is not 
that of storage. 

Shipment to the central markets may also differ as to 
whether the price paid includes or excludes shipping costs. 
"F. o. b." transactions require the delivery of the commodi- 
ties free on board at the local or other agreed shipping point, 
the freight charges and other shipping costs beyond to be paid 
by the purchaser. "C.'i. f." (cost, insurance and freight) 
transactions on the contrary call for net prices, the seller 
agreeing to pay the freight charges and insurance costs. 

Local Dealers' Sales. — Farm products purchased from the 
grower by local consumers or by dealers who resell them for 
local consumption are essentially simple and require no special 
description. Those which are purchased by local dealers for 
shipment to central markets are disposed of in any of the 
various ways pursued by growers who sell in the central mar- 
kets. The practice of selling without the assistance of central 
commissionmen is, however, more common among local dealers 
than among growers. A larger number have terminal sales- 
men or have standing contracts with central dealers. Many 
local buyers, moreover, are merely the local salaried agents of 
large central dealers or manufacturers who instruct them 
where to ship their purchases and arrange for the resale or dis- 
position of all shipments. Some local dealers, likewise, act as 
local commission agents or brokers for central market buyers, 
receiving a commission or brokerage fee on all fruit, wool or 
other farm products purchased on account of their principals, 
but having no voice in their resale at the central markets. 

Central Market Trade Organization.— One of the chief 
characteristics of the trade in agricultural products is its in- 
directness as compared with the trade in manufactures and 
other commodities. A large share of the countr/s farm crops 
before they reach the consumer pass through central market 
exchanges, the sales of which are made indirectly through 




authorized exchange brokers, instead of passing directly from 

seller to purchaser. 

The principal method of marketing farm products at the 
central markets, therefore, is by sale on organized produce ex- 
changes variously known as boards of trade, chambers of 
commerce, bourses or exchanges. Some of them are general 
exchanges on which many kinds of farm products and even 
non-agricultural commodities are sold, while others consti- 
tute special markets for but one or at most a small number of 
articles. Many of the grain exchanges, such as the Chicago 
Board of Trade and the New York Produce Exchange, are 
examples of general exchanges, while most of the cotton, to- 
bacco, wool, livestock, milk and dairy produce exchanges are 
special exchanges. Produce exchanges may also be divided 
into spot or cash and speculative or future markets, the mem- 
bers of the former confining their activities to the purchase 
and sale of spot produce for current delivery while the latter 
in addition deal in future contracts which call for delivery 
at some future time, and, as is more fully described in a later 
chapter,^ are frequently fulfilled without the delivery of 
actual farm products. 

The spot or cash transactions made through exchange 
members are most commonly conducted on the basis of sam- 
ples selected by authorized samplers and exhibited on the floor 
of the exchange. They may also be made on a basis of duly 
established grades or standards, upon a combination of both 
samples and grades, or the commodities in their entirety may 
be exhibited in authorized yards or warehouses as is the gen- 
eral practice in the sale of livestock and to some extent in the 
sale of leaf tobacco, wool, fruit and vegetables. 

The farm products concentrated in a given central market 
are mainly disposed of on the exchange located in that par- 
ticular center, but may also be sold on exchanges located else- 
where. Large quantities of grain held by the dealers of the 
primary gram markets of the West, for example, are sold 
through brokers on the seaboard grain exchanges on the basis 

of authorized samples. 

^ See chap, vii, p. 140. 


The ''future'' transactions made on the speculative ex- 
changes are based upon agreed standard or basis grades of a 
given commodity, the terms of the future contract and of the 
exchange rules specifying what grades may be delivered and 
how price differences shall be settled should other than the 
basis grade be delivered when the contract matures. Three 
principal groups of trade interests deal in "futures": (1) 
merchants, exporters or other dealers, millers and spin- 
ners who desire to eliminate or reduce the speculative risks 
resulting from fluctuations in the price of grain, cotton or 
mill products which they have on hand or have privately con- 
tracted to deliver or accept, frequently sell or purchase futures 
to hedge their spot transactions; ^ (2) speculators who deal in 
future contracts with a view to obtaining profits from fluc- 
tuations in future prices; (3) flour millers and cotton spin- 
ners who sometimes purchase future contracts on the ex- 
changes and require the delivery of grain or cotton upon ma- 
turity, but the use of futures for this purpose has been limited 
because the seller may usually deliver any one or more of a 
number of different grades. 

Farm products are at times sold at auction sales. It is in 
some cases difficult to clearly distinguish between exchange 
and auction markets, but the distinguishing feature of the 
latter is that the sales on them are made through one or a 
limited number of auctioneers who offer the auctioned prod- 
ucts directly to the highest bidders who may or may not be 
members of an established trade organization, while the sales 
on the exchanges are the result of bids and offers between any 
of a large number of exchange members who act for them- 
selves or as brokers for their customers. 

The auction sales in the large central fruit and vegetable 
markets are especially common and are typical. They are 
conducted through auction companies which exhibit samples 
of fruit or produce owned by them or placed in their care by 
growers, local shippers, importers, commissionmen, central 
dealers or others and sell them through auctioneers to the 
highest bidders. The leaf tobacco auction sales of the South 

^Hedging is described in chap, vii, p. 156. 




are also important, but instead of being controlled by special 
auction companies, are conducted on the floors of public to- 
bacco warehouses and usually in accordance with trade regula- 
tions imposed by tobacco exchanges or public authority. 

Many farm products are, also, sold privately in the central 
markets. Central commissionmen, brokers, distributors, 
wholesale dealers or jobbers, contractors, exporters, importers, 
etc., frequently deal directly with local shippers or growers, 
with each other, with flour and textile mills, malt houses, or 
other consumers, or with secondary wholesale and retail es- 
tablishments. Such private transactions, as in the case of 
exchange sales, may call either for immediate or future deliv- 
ery. Private future contracts, however, usually provide for 
the delivery of a particular grade or quality of produce at a 
specified date and at a designated place which may be located 
anywhere in the world. They are cash contracts which differ 
in detail and are made by persons who intend to demand or 
make actual delivery. A relatively small number of large 
cities have established wholesale municipal markets where ag- 
ricultural foods may be distributed through private or auction 


Secondary Wholesale Market Transactions. — Secondary 
wholesale markets ordinarily do not contain organized ex- 
changes, the wholesale buyers in them purchasing their sup- 
plies of farm products in the central markets, from local deal- 
ers or growers in the local markets, or from salesmen or 
brokers who canvass the secondary markets for central dealers 
or distributors. When purchasing in the central markets any 
of the trade methods there available may be pursued. 

The wholesale purchasers of the secondary markets are of 
three principal types: (1) industrial concerns such as flour 
mills, cotton or woolen mills, meat-packing and slaughtering 
plants, malt houses and tobacco factories, which purchase in 
wholesale lots for consumption; (2) wholesale dealers in prod- 
ucts such as fruit and vegetables, dairy products, hay, straw 
and oats, who purchase to resell either to retailers or con- 
sumers; and (3) retail stores purchasing in wholesale quanti- 
ties for resale in smaller lots to consumers. 



Retail Sales. — Such farm products as are retailed to con- 
sumers are also handled through three main channels : 

1. A large group of general and special retail dealers, in- 
cluding general retail grocers operating individually, in 
chains, or as members of retail associations ; special fruit and 
produce retailers; delicatessen retailers; hucksters and ven- 
dors ; milk dealers or contractors ; retailers of dairy products ; 
and grain, hay, straw and feed dealers. 

2. General and special wholesale dealers who conduct a 
retail as well as a wholesale business. 

3. Growers or producers, especially those located near the 
retail markets, who sell directly to the consumers. 

Retailers of farm products, other than those who are grow- 
ers or producers, obtain their supplies either from nearby 
wholesale dealers or from any of the various sources which 
supply the wholesale trade. Their retail sales are made di- 
rectly to consumers in numerous ways. They sell (1) cur- 
rently at private retail stores or other established private 
places of business; (2) currently at the consumers' premises 
as is the custom of hucksters and vendors of fruit and vege- 
tables and of such retail stores as daily send solicitors to the 
consumers or use their delivery service for soliciting purposes ; 
(3) by obtaining a permanent order or agreement to deliver 
specified quantities of milk or other products until notified 
to the contrary; and (4) at public or municipal markets. 

Growers or producers likewise retail chiefly in the four 
ways mentioned in the preceding paragraph. Their perma- 
nent retail stores, however, are relatively of least importance, 
consisting mainly of general cooperative stores, most of which 
are organized primarily to purchase groceries and general mer- 
chandise and for the profit anticipated from the sale of such 
wares to outside customers rather than as important means 
for selling farm products. Growers retail mainly at the con- 
sumers' premises, either currently or on the basis of standing 
orders, and in municipal markets. Livestock is frequently 
retailed at open markets known as '^cattle fairs," "horse mar- 
kets,'^ etc., where livestock may on agreed days be sold pri- 
vately or at retail auctions. Small quantities of eggs, fruits 



and produce have been retailed through the medium of ex- 
press companies and the parcels post service. 

Municipal markets for the sale of vegetables, fruit, eggs, 
butter, poultry and other farm produce and foodstuffs by 
growers and dealers have been established in most large and 
in many smaller cities. Some of them are open-air or curb- 
stone markets and others covered or inclosed markets. Most 
of them are strictly retail markets while others are used both 
for wholesale and retail selling. Some are operated free of 
charge while others require growers and dealers to pay a 
license fee or an annual, monthly, weekly or daily rental. 
The sales in these markets, moreover, may be made from wag- 
ons and trucks or from fixed stands, and they may or may not 
be subjected to public inspection. The establishment of mu- 
nicipal retail markets for growers has been facilitated by the 
rise of the freight trolley, motor truck, parcels post, local 
water transportation and railroad "market shipment" ser- 

There is at present much agitation in favor of establishing 
a larger number of municipal markets in the larger cities. 
There are also some who desire the establishment of large 
wholesale or terminal'municipal markets where farm products 
of many kinds received from distant as well as from nearby 
growers could be properly inspected upon arrival and either 
retailed in small lots by the growers or distributed to retail 
dealers and large consumers in wholesale lots, privately or at 
auction sales conducted by bonded municipal auctioneers. 

Consumers' Purchases. —As the growers of farm products 
stand at one extreme of the agricultural trade organization so 
the consumers stand at the other. Consumers may purchase 
in any of the various groups of markets, and at any step in the 
trade, machinery provided for the purchase and sale of farm 
commodities. Some of them purchase directly from the farm- 
ers or from local market dealers, some purchase in the central 
markets from any of the wholesale trade interests located there 
or in the secondary wholesale markets from wholesale dealers 
stationed at such points, and others obtain farm products from 
agricultural retail dealers. The description of the agricul- 



tural trade organization may begin either with the growers or 
the consumers and since the former method facilitates discus- 
sion and obviates undue repetition it has been adopted in 
this and succeeding chapters. 

The increased cost of foodstuffs has in recent years en- 
couraged the formation of ''consumers' leagues" or associa- 
tions which in most instances endeavor to instill publicity 
into the marketing organization and to instruct consumers 
how to purchase, although they sometimes in order to reduce 
retail prices undertake the purchase and resale of agricultural 
foods. Cooperative consumers' retail stores have also been 
organized in a few cities. 

Exporting and Importing Methods 

Agricultural Export Methods. — Many trade interests are 
engaged in the exportation of American farm products, and as 
will be shown in subsequent chapters the methods of exporting 
are not uniform. Most of the various kinds of agricultural 
exporting concerns may, however, be divided into three prin- 
cipal groups : 

1. American Exporting Concerns. — American exporters 
who handle farm products on their own account may be either 
general or special, the former shipping a variety of commodi- 
ties, and the latter one or at most a small number of farm 
products. Most of them are specialized, a'^d many are en- 
gaged in domestic as well as in foreign commerce. Thus, 
much grain is exported by terminal grain-elevator companies, 
central market grain dealers and special grain-exporting con- 
cerns. Most of the cotton is shipped by American cotton-ex- 
porting companies or brokerage concerns; most export cattle 
by the large meat-packing houses and by special livestock ex- 
porting concerns; and much leaf tobacco by subsidiaries of 
tobacco manufacturing concerns or by special leaf tobacco 
dealers and packers. The headquarters of these exporting 
concerns may be either in the central markets of the interior 
or in the seaboard markets. 




2. American Commission Houses. — A portion of the agri- 
cultural exports is handled by domestic commission houses, 
which may likewise be either general or special. Indeed the 
exporting concerns mentioned above sometimes fill orders on a 
commission basis instead of buying and selling on their own 

S. Foreign Agents. — Foreign importers at times send 
agents to the United States to purchase American farm prod- 
ucts. The practice is especially common in the exportation 
of leaf tobacco, but it exists also in other branches of the agri- 
cultural export trade. 

The exporters of farm products make their purchases in 
any of the markets and in any of the various ways in which 
agricultural commodities are purchased for doniestic use. 
They ship them to foreign import houses, wholesale dealers, 
commissionmen, brokers, and sometimes directly to foreign 
consumers. They dispose of them both by private sale and on 
foreign or American exchanges, and in many instances they 
merely fill orders which they have received from abroad. In 
the foreign trade, sales to foreign buyers are very frequently 
made on the basis of grades or agreed standards rather than 
on the basis of samples, for the foreign markets are far re- 
moved and a vessel load of grain, cotton or other farm staple 
may be resold by the original importers long before its arrival. 

The trade machinery is unusually well organized in the 
agricultural export trade. Foreign and American exchanges 
and commercial houses are connected by cable; orders based 
upon established grades or standards can be readily trans- 
mitted ; and trade customs and practices are of long standing 
and are well understood by all parties concerned. For these 
reasons and because of the relative ease with which markets 
can be found for foods and raw materials, many of the costly 
marketing methods which are necessary in the exportation of 
manufactures are not essential to the successful exportation of 
American farm products. 

Agricultural Import Methods. — There is even less uni- 
formity in the methods of importing farm products, for the 
imports include a wider variety of commodities and are ob- 


tained from an amazingly wide range of countries. Many are 
imported from the more recently opened trade regions of the 
world rather than from the well-established countries of west- 
ern Europe.^ 

They are imported principally by three groups of concerns : 

1. American Import Houses.— There are many special 
and general importers who purchase foreign agricultural prod- 
ucts on their own account with a view to reselling them to 
coffee roasters, sugar refineries or other consumers or dealers. 

2. American Import Commission Houses. — Some agricul- 
tural imports are handled on commission by concerns to whom 
they have been consigned or to whom purchasing orders have 

been given. 

3. American Consumers. — ^American manufacturers, par- 
ticularly those requiring large quantities of raw agricultural 
materials, sometimes import directly from foreign exporters. 
For the production of some commodities, such as bananas, 
leaf tobacco, and sugar, American traders and manufacturers 
at times own foreign plantations on which they produce a 
portion of their requirements. 

Imported farm products are variously purchased from for- 
eign export houses, wholesale dealers, commissionmen, brokers, 
central sugar refineries or other middlemen, or directly from 
foreign producers. They are sometimes purchased in the 
country in which they are produced and at other times indi- 
rectly in England, Holland, Belgium, Germany or other Euro- 
pean countries where wool and other products are concen- 
trated for resale and transshipment. They are variously pur- 
chased privately, on exchanges, or at public auction sales. 
Bids and offers may be made by cable or mail, standing 
arrangements with foreign exporters or commissionmen may 
be made, and numerous American buyers are sent abroad so 
as to reduce costs and obtain the quality of products desired 
at favorable prices. When foreign agricultural products are 
imported to be resold in the United States they are disposed 
of privately, on exchanges or at auction sales i^ the same 
manner that domestic farm products are sold in the wholesale 

*See chap, xviii. 




markets. Some imported farm products, such as green coffee, 
raw sugar and wool, are frequently sold on organized Amer- 
ican exchanges, but in the agricultural import trade as a 
whole such sales are less common than in the export trade. 

Although the agricultural trades are similar, the districts 
in which they are produced, their markets, the methods of 
buying and selling, shipping, inspecting, grading, storing and 
otherwise handling them, the extent and manner of public or 
exchange control, the methods of collecting trade information, 
and the factors influencing their prices, all differ in many re- 
spects. The purpose of subsequent chapters is to describe 
the trade in some of the principal farm crops in greater 


(See references appended to Chapter I designated by a *.) 

BAKiEY, L. H. Cyclopedia of American Agriculture (1909), 

Vol. iv, pp. 215-269. 
Cross, Ira B. Cooperation in California, American Economic 

Review (Sept., 1911). 
Hough, B. O. Elementary Lessons in Exporting (1909), pp. 


Ocean Traffic and Trade (1914), chaps. 8, 9, 13 and 14. 

King, C. L. Trolley Light Freight Service and Philadelphia 

Markets (Oct., 1912). 
Sparling, S. E. Business Organization (1906), chaps. 8 to 11. 
Weld, L. D. H. Statistics of Cooperation Among Farmers in 

Minnesota, 1913, Minnesota Agricultural Experiment 

Station, Bulletin No. 146 (1914). 
New York Mayor's Market Commission: Keport of (1913). 
United States Industrial Commission: The Distribution and 

Marketing of Farm Products, Vol. 6, Part I (1901). 

(For references on markets for particular commodities and par- 
ticular phases of trade organization, see bibliographies 
appended to subsequent chapters.) 




Functions of Country Elevators and Warehouses. — Before 
that portion of the country's grain crop which is marketed by 
the growers is concentrated at a relatively small number of 
great primary grain centers it passes through thousands of 
local grain markets. The grain farmer's markets are ordi- 
narily not the huge elevators found at the central grain mar- 
kets of the interior and the seaboard, but the thousands of 
small country elevators and warehouses which are scattered 
throughout the two hundred million acres which produce the 
country's principal grain crops. The sales of many thousands 
of grain growers of the United States are made principally at 
the country elevators and warehouses which constitute the first 
link in the extensive trade and shipping organization which 
has been evolved for the sale and distribution of the grain 
crops. As is shown in Table II they annually handle over 
four hundred million bushels of wheat, over five hundred 
million of corn, over three hundred million of oats, from 
ninety to one hundred million bushels of barley, and smaller 
quantities of rye, flaxseed and other minor grains. 

As is stated by the Bureau of Labor Statistics in a recent 
publication : ^'The province of the country grain elevator is 
to supply a market to the farmer for his grain, to afford a 
temporary storing place for grain going to market, and to 
provide an easy means of transferring it from the farmers' 
wagon to the car for shipment." ^ 

* * * Wheat and Flour Prices from Farmer to Consumer, ' ' Bulletin 
No. 130, p. 17. 




Geographical Distribution of the Local Grain Trade 

nistribution af Local Wheat Trade.— The TJnited States 
has in recent years raised over seven hundred million bushels 
of wheat annually, having a farm value of from $500,000,000 
to $600,000,000. At present the country's annual wheat crop 
is second only to that of Russia, and for many years it ex- 
ceeded that of any foreign country. American wheat exports, 
owing to largely enhanced home requirements, have steadily 
declined during the twentieth century, and prior to the Euro- 
pean War were exceeded by those of Russia and Argentina. 
Indeed, were it not for the exports of American wheat flour, 
the exports of wheat from the United States would also be 
exceeded by those of Roumania, Canada, Australia and British 
India, in each of which countries there is a growing surplus 
as there was in the United States during the eighties and 
nineties. Before the outbreak of the European War but 10 to 
19.5 per cent, of the American wheat crop had been exported 
during recent years as compared with 21 to 41.5 per cent, 
during the years 1875 to 1900. 

The wheat-growing area of the United States has been 
spread over such a wide territory that there is little likelihood 
of a general crop failure. Local failures are not uncommon, 
but the diversity in variety of wheat and geographical loca- 
tion tends to maintain a high average crop. During the year 
1913, the order of importance of the principal wheat-growing 
states was: North Dakota, Kansas, Minnesota, Nebraska, 
Washington, Illinois, Indiana, Missouri, Ohio, South Dakota, 
Pennsylvania, Montana, Oklahoma, Iowa and Oregon — ^but 
their relative position changes from year to year. In 1912, 
for example, the wheat crops of Illinois, Indiana and Ohio 
were partial failures while those of North and South 
Dakota and Kansas were the largest in the history of those 


As is shown in the accompanying map (No. Ill), the 
wheat-growing area may be divided into four principal dis- 
tricts. The first or soft winter wheat belt comprises the states 


























lying east of the Mississippi and north of the Ohio River from 
western Pennsylvania to Illinois. The second comprising the 
central trans-Mississippi Valley: Kansas, Nebraska, Missouri, 
Oklahoma, and Iowa-extending as far west as the Great 
Plains— grows chiefly the various varieties of hard winter 
wheat. The third, or spring wheat belt, includes North and 
South Dakota and Minnesota. The fourth includes the wheat 
fields of the Pacific Slope : Washington, Oregon, Idaho and 
parts of California— where both spring and winter wheat are 
grown. The rapidly expanding wheat fields of Montana may 
either be included in the last-named district or regarded as 
the leading producers in a fifth or Rocky Mountain wheat 

•LI J. 

The Department of Agriculture estimates that during the 
decade ending in 1915, 57.7 per cent, of the country's wheat 
crop reached the grain market, i. e., was shipped out o± the 
county in which it was grown. The remainder was retamed 
bv the wheat growers for seed, locally ground mto flour or 
feed or sold for local consumption. Most of the 350,000,000 
to 540 000,000 bushels which annually entered the country s 
grain trade was handled locally by country elevators or ware- 
houses. . . 1 • m ui 

Distribution of Local Com Trade.— As is shown in lable 
II the corn crop of the United States is vastly more im- 
portant than the wheat crop. In 1913 it reached the enor- 
mous total of 3,124,746,000 bushels having a farm value of 
one and one-half billion dollars. Over 70 per cent, of the 
world's annual corn crop is grown in the United States ; its 
nearest rivals-Austria-Hungary and Argentina-producmg 
less than 300 million bushels each. 

Though about 500 million bushels of corn annually enter 
into the grain trade of the United States, grain dealers have 
always been primarily concerned with the wheat crop. This is 
because less than 30 per cent, of the total corn crop reaches 
the country's grain markets. Over 70 per cent, annually is 
disposed of locally for seed purposes and to fatten livestock. 
Much the larger share of the corn crop reaches the gram trade 
only after it has been converted into livestock or beef, mutton 





and pork products.^ Yet, there are thousands of local gram 
elcvatdrs and warehouses which handle corn, for the volume 
which now reaches the grain trade exceeds that of wheat. 

As is graphically shown in Map No. IV, though appreci- 
able quantities of corn are grown throughout the southern 
states and in various regions throughout the country, there is 
really but one great American corn belt, and it extends 
through the Ohio and Mississippi River Valley from Ohio to 
northern Texas. The corn fields of Iowa, Illinois, Missouri, 
Ohio, Indiana, Kansas, Nebraska, Texas and Oklahoma pro- 
vide the corn market with most of its annual supply and feed 
vast numbers of cattle, sheep and hogs. The corn belt is 
located principally within the relatively small oval indicated 

in the map. 

Bistribution of Local Trade in Oats.— The oats crop of 
the United States {See Table II), though closely rivaled by 
that of Russia, is also larger than that of any foreign country 
in the world. So large, however, are the crops of Russia, Ger- 
many, Canada, France, Austria-Hungary, Great Britain, Ar- 
gentina and other countries, that the oats fields of the United 
States produce but 20 to 30 per cent, of the world's crop. 
The international trade in both oats and corn is small as com- 
pared with that of wheat, the exports of American oats being 
almost negligible and those of corn in recent years comprising 
from li to 4^ per cent, of the annual crop. As in the case 
of corn, moreover, much the larger share of the oats crop of 
the United States is retained for local consumption and does 
not enter the country's grain trade. During the decade ending 
in 1914 somewhat less than 30 per cent, of the annual oats 
crop was shipped out of the county in which it was grown. To 
collect 300,000,000 bushels of oats annually from the thou- 
sands of farmers who sell a portion of their crop, however, 
requires a large number of country grain elevators and ware- 
houses. Many of those located in Iowa, Illinois, Minnesota, 
North Dakota, Ohio, Wisconsin, Indiana, Nebraska, South 
Dakota, Kansas and Michigan, regularly hand le oats as well 

»N. C. Murray: ''Disposition of Feed Crops, '* Farmers' BuUe- 
tin No. 629, p. 8. 


















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as other grains. All the states of the corn belt are heavy pro- 
ducers of oats, but the oats crop is more widely scattered, 
for oats thrives in northern states such as Wisconsin, 
Michigan and in the states of the spring wheat belt where 
the early frosts have retarded the rapid introduction of 


Distribution of Local Trade in Barley.— The barley crop 
of the United States is decidedly smaller than that of wheat, 
com or oats {See Table II). The greatest barley-prod ucmg 
country is Russia where over 574,000,000 bushels were grown 
in 1913 as compared with 178,189,000 bushels in the United 
States. From 45 to over 57 per cent, annually of the Ameri- 
can crop reaches the grain market, principally in Minnesota, 
California, North Dakota, Wisconsin, South Dakota and Iowa. 
The crops of other minor grains— rye, buckwheat and flaxseed 
— are shown in Table II. 

Transfer of Grain from Grower to Country Elevator or 


Length and Cost of Local Hani.— Though the number of 
country elevators and warehouses at which the grain growers 
sell their crops is increasing, and their location at local ship- 
ping points is arranged with reference to the proximity of 
the grain fields as well as with reference to railroad connec- 
tions, much grain requires long and expensive country hauls. 
The average distance from the wheat fields of the United 
States to the local markets in which it is sold was in 1906 
reported to be 9.4 miles, and to vary from 4 to 22 miles m 
different states ; ^ and corn was in that year hauled by the 
growers to the country elevator, an average distance of 7.4 
miles in the United States as a whole and from 3.2 to 29.4 
miles in various states. The average distance from all farms 
producing crops of every kind to the local markets in 1915 is 

» ''Costs of Hauling Crops from Farms to Shipping Points,'' 
IT. S. Bureau of Statistics (Department of Agriculture), Bulletin 
No. 49. 



reported to be 6.5 miles, and from the more remote farms 8.7 

The average cost of transporting grain to the local mar- 
kets was in 1906 reported to be 9 cents per 100 pounds in the 
case of wheat and 7 cents in the case of corn. Inasmuch as 
railway-lake rates on wheat from Chicago to New York 
varied from 5.02 to 7.01 cents per bushel during the years 
1900 to 1913, and all-rail rates ranged from 9.60 to 11.70 
cents, it is evident that tjie country haul, although short as 
compared with the railroad haul to or from the central grain 
markets, is an important consideration in the local grain trade. 
The Bureau of Statistics of the Department of Agriculture 
estimated that the cost of hauling the 1905-1906 crop of corn, 
wheat, oats, barley and flaxseed from the farms to local ship- 
ping points aggregated over $62,000,000. The cost of hauling 
corn was estimated to comprise 9.6 per cent., wheat 7.2 per 
cent., oats 7.7 per cent., barley 8.3 per cent., and flaxseed 5.3 
per cent, of the farm value of the loads hauled. 

Methods of Local Hauling. — Grain is conveyed to local 
shipping points by various methods. Most of it is hauled by 
the growers themselves, and is regarded as a secondary source 
of employment for the equipment and drivers whose chief 
employment is on the farms. Each grower may perform his 
hauling individually, or neighboring growers may perform it 
cooperatively. Some grain hauling, however, is performed 
by hired "freighters," for in some parts of the Mississippi 
Valley and especially in the Pacific Slope and Rocky Mountain 
grain belts, the distances to local shipping points are so long 
that it is unprofitable for the growers to maintain sufficient 
equipment and drivers to perform all the necessary hauling. 
The professional freighters haul grain and other farm produce 
at regular tariffs and on the return trip frequently transport 
farm machinery, supplies or merchandise. Some hauling is 
also done by the elevator companies. 

Grain may be hauled either in bulk or in sacks, and it may 
be hauled either from the grower's granary or direct from the 

* U. S. Bureau of Crop Statistics : The Agricultural Outlook, 
Apr. 23, 1915, and Tarmers' Bulletin No. 672, pp. 11-14. 





threshing machine in the fields. The practice in these mat- 
ters depends upon the requirements and customs of particular 
markets, the method of harvesting, the financial condition of 
the growers, their views as to the desirability of present or 
future marketing and other local considerations. The type of 
equipment used, likewise, varies widely and depends some- 
what upon local conditions, such as the length of haul, the 
condition of the roads, and the method of hauling. The num- 
ber of horses or mules per driver varies from two to fourteen, 
the number of wagons per haul from one to two or more, and 
the weight of grain hauled from 800 to 16,000 pounds. The 
wagons may be ordinary farm wagons, or vehicles especially 
constructed to carry grain in bulk, and they may be hauled 
individually or in trains. Professional freighters sometimes 
haul loads of seven tons in one freight wagon and its trailers, 
and use as many as twelve or fourteen horses in one team. 
In recent years there are instances in which grain has been 
hauled to local shipping points in automobile trucks. 

Description" of Country Elevators 

Country elevators are located and constructed so as to per- 
form their various functions expeditiously. In every impor- 
tant grain-growing district, except on the Pacific Slope where 
most of the grain is handled in sacks, there are hundreds of 
these elevators along each of the grain-carrying railroads. 
Many local grain-shipping points are equipped with five or six 
elevators, and at most local markets in important grain-grow- 
ing districts there are at least two. 

Country elevators usually have a capacity of only 20- or 
25,000 bushels and consequently cannot store large volumes 
of grain for long periods of time. Since a large proportion 
of the grain available for the market is sold by the growers 
during the ninety days after its harvesting, they are so 
equipped that they can handle whatever quantities are brought 
to them. The larger elevators handle from 40- to 300,000 
bushels, some handling as much as 1,000,000 bushels annu- 


ally. The yearly output of the average country elevator is 
100,000 bushels or less. It is considered that an annual busi- 
ness of 100,000 bushels of wheat bought at the primary market 
price minus the freight rate and a price margin of three cents 
per bushel will yield a fair profit on the investment. The con- 
struction and equipment cost of the average country elevator 
is about $4,000, although the cost varies from $3,000 to 

These elevators are constructed so as to reduce operating 
costs to a minimum. The following concise description is 
giv . by the Bureau of Labor Statistics : 

The country elevator is so constructed as to call for very little 
manual labor. The farmer drives on the scales with his loaded 
wagon, which is weighed in gross, then drives into the elevator 
shed where the end board is taken from the wagon, and by the 
pulling of a lever the wagon is tipped backward and all the 
grain runs out of the wagon box into the bin below. He then 
drives on the scales again and the empty wagon is weighed. 
From the difference in these weights the number of bushels is 
computed and the farmer receives a certificate of weight and 
possibly at the same time a check for his grain. The wheat 
dumped into the bin below the wagon floor is hoisted by elevat- 
ing machinery to a bin in the elevator whence it is spouted into 
a car for shipment.* 

The ordinary elevator has but six or eight bins or lofts 
into which the grain is elevated from the bins below the wagon 
floor. Fewness of separate bins, as well as trade considera- 
tions, leads to the mixing of the grain. Indeed one source of 
elevator profit is the skillful mixing of different grades in 
such a way as to raise the grade of a part of the grain pur- 
chased from the farmers. 

The operating costs of the average country elevator are 
low because a manager and from one to three helpers are able 
to operate it even during the busy season, and one or two men 
can operate it during the months of dull business. In the case 
of wheat a margin of 3 cents per bushel and an allowance of 

* * * Wheat and Flour Prices from Farmer to Consumer, ' ' Bulletin 
No. 130, p. 17. 





the freight rates to the primary market is considered sufficient 
to cover operating costs, insurance, inspection fees, "shrink- 
age" in weight incident to handling the grain and all current 
expenses, as well as a return on the investment. In purchas- 
ing corn, oats and barley a margin of 1 J to 2 J cents per bushel 
is ordinarily allowed in computing the country price, while, 
owing to a greater degree of risk, the margin in local pur- 
chases of flaxseed is usually 5 or 6 cents a bushel. 


Management of Country Grain Elevators 

Classification of Country Elevators. — Country grain ele- 
vators are owned and managed in three principal ways: (1) 
by "line elevator companies,'' (2) hy local grain dealers, and 
(3) by farmers' cooperative elevator associations or companies. 
In addition to the many elevators operated in these ways, a 
smaller number of elevators are operated (4) by mill owners 
and malting concerns. A portion of the barley crop is pur- 
chased directly from the farmers through elevators operated 
by malting plants, but the number of country elevators oper- 
ated by flour and grist mills is small. A few country ele- 
vators are also owned and managed (5) by "bonanza farm- 
ers" whose acreage and crop are sufficiently large to warrant 
the investment of funds in elevator properties. The railroads 
still have an interest in some elevators, and some grain is 
consigned to central commissionmen by farmers or shippers 
who load the grain into cars without the medium of elevators 
or warehouses. 

Line Elevator Companies. — The so-called ^line elevator 
company" is a concern operating large numbers or lines of 
country elevators along one or more railroad routes and has 
its headquarters at the primary market to which it ships most 
of the grain purchased from the farmers. Some of these con- 
cerns which were first organized in the period of 1889 to 1900 
operate lines of elevators extending throughout three or more 
states. In competing with local grain elevator dealers the line 
elevators have the advantage in that they extend over wide 

areas and consequently obtain a larger share of the crop. 
Since the profits of country elevators depend not only upon 
the price margin but also upon the volume of grain handled, 
the line elevator concerns have at times been able to make a 
fair aggregate profit even though the profit per bushel of 
grain was small. They have an advantage also in that the 
large volume of grain handled enables them to sell their grain 
at the primary markets through agents of their own. By 
avoiding the central commissionman they eliminate one of the 
middlemen of the grain trade. It has, moreover, been asserted 
that in the past, before common carriers were subjected to 
stringent federal and state regulation, the line elevator con- 
cerns sometimes had the advantage of special railroad charges 

and services. 

The local agents in charge of line elevators receive daily 
instruction from headquarters by mail as to the prices to be 
paid for all grades of the various grains purchased, and when 
wide price fluctuations suddenly occur at the primary market 
during the day price changes are telegraphed to them. The 
prices paid the farmers depend upon the prices prevailing at 
the primary grain market, the farmers receiving the primary 
market prices less the cost of freight and a margin or allow- 
ance of a certain number of cents per bushel. As was for- 
merly explained the price margins usually range from IJ to 
2i cents for the coarser grains and from 5 to 6 cents for flax- 
seed.^ Price margins for wheat vary considerably but an ef- 
fort is made to maintain them at about three cents per 


The grading of the grain at the country elevators is largely 
a matter of local judgment, because grading and inspection at 
the local markets is not regulated by state law to the extent 
that it is at the primary grain markets. At points where sev- 
eral buyers are stationed the resulting competition has in re- 

*" Wheat and Flour Prices from Farmer to Consumer," Bureau 
of Labor Statistics, Bulletin No. 130, pp. 18-26. 

"S. Harris: ''Methods of Marketing the Grain Crop,'' Annals 
of the American Academy of Political and Social Science, Sept., 1911, 
p. 41. 



cent years usually guaranteed liberal grading to the farmer 
because it is to the interests of the various elevator concerns 
to handle as large a volume of grain as. possible. At non- 
competitive points there is more complaint on the part of 
farmers, and in some local markets, especially in regions 
where the quantity of grain sold is relatively small and 
where the trade is not well organized, grain is still purchased 
from the farmers without the establishment of definite grades. 
The buyer in the latter case bears in mind the probable grades 
which the grain will be given at the primary market, but in 
bargaining with the farmer no official grades are established. 

Since most of the available grain is purchased from the 
farmers shortly after its harvesting, the line elevator com- 
panies require large sums of cash during the busy season. 
Being large concerns they can, of course, provide a portion of 
the needed funds directly from their own resources, but addi- 
tional cash with which to buy grain at the country elevators is 
realized on the grain which is shipped to the primary market 
from day to day and sold at a profit. Grain which has been 
sold "to arrive,'' i. e., before it has actually arrived at the 
primary market, and which is shipped on order bills of lading, 
may provide the local elevator agents with cash at the time 
of its shipment, for banks accept such bills for payment. 
Some cash, moreover, is borrowed from banks with grain in 
storage as collateral. As will be more fully explained in other 
connections, grain "warehouse receipts" issued at the central 
elevators in the primary markets, when accompanied by an 
insurance certificate, are readily accepted by many banks as 
collateral for loans.^ 

The profits of the line elevator companies result from the 
sale of grain in the primary markets at a higher price than 
the price paid to the farmers. They sell to central grain job- 
bers or dealers, to speculators and to flour- and grist-mill 
operators, exporters, malt concerns, or cereal food manufac- 
turers. They may sell their grain immediately after its pur- 
chase from the farmers, or they may hold it for a rise in price, 
and they may contrac t to deliver grain at the primary market 

^ Chaps, iv, XV, xvi. 



even before they have purchased it from the growers. Ordi- 
narily they aim to sell at a price which will yield them a rea- 
sonable trade profit on each bushel handled, rather than to 
hold grain in storage for a speculative future profit. To 
safeguard their trade profit they habitually base their country 
prices upon the prices prevailing at the primary market, de- 
ducting from the latter the freight rates and a price margin 
sufficient to cover expenses and yield a profit on the invest- 
ment. Since the prices at the primary markets fluctuate, the 
line elevator companies do not, however, depend wholly upon 
the small price margin which is allowed. Many do not con- 
tract to deliver grain which they do not possess at the time 
of sale, or keep on hand grain which is not immediately sold, 
without protecting their trade profits by "hedging" in the 
speculative markets of the large grain exchanges. To again 
quote the report of the Bureau of Labor Statistics : 

When he has a quantity of wheat on hand he hedges in the 
grain market by selling a future; that is, he enters into a con- 
tract of sale for future delivery. Should the price of wheat 
advance he makes a profit on his wheat in stock and loses on 
his future when he closes it out. On the other hand, should 
the price of wheat decline, he loses on his wheat in stock but 
makes a profit on his future by buying on the market at a lower 
price to close it out. Thus, the speculative side of the grain 
market affords the dealer in actual grain an opportunity to do 
a comparatively safe and conservative business. Without the 
opportunity to deal in futures, conservative dealers state that 
they would not buy wheat in any considerable quantity except 
on a much wider margin and at a consequent lower price. 

Since ^Tiedging" is not peculiar to the local grain trade it 
will be more fully discussed on a later page.^ 

Local Grain Dealers' Elevators. — The manner of conduct- 
ing the business of country elevators operated by independent 
local grain dealers is substantially the same as that described 
in connection with line elevator concerns, with the exception 
that they are not managed from headquarters located at the 

^ See chap. vii. 



primary market and ordinarily sell through central commis- 
sionmen instead of through their own agents. The local grain 
dealers preceded the line elevator companies. Originally they 
operated independently of each other, and some of them still 
act individually, but many of them have for various reasons 
ujiited into 'local grain dealers' associations." The associa- 
tions were originally formed in order to obtain favorable 
treatment from railroad carriers; to correct abuses in local 
grading and to induce farmers to sell their grain under a sys- 
tem of grading; to correct abuses at the primary markets in 
the matter of grading, inspection, weighing and "dockage" for 
unclean grain ; and to induce the farmers to bring their grain 
to market in a better and cleaner condition. The organization 
of dealers' associations began prior to the rise of line elevator 
companies, but the desire to counteract the advantages of 
these companies became an additional motive. By 1900 some 
of the associations had become so strong that there were com- 
plaints charging arbitrary coercion of individual dealers, 
central commissionmen, railroads and farmers. The rise of 
line elevators and farmers' cooperative elevators has, however, 
deprived the local dealers' associations of much of their for- 
mer influence. 

Parmers' Cooperative Elevators.— Many of the present-day 
cooperative farmers' elevators are also operated substantially 
in the same manner as line or local dealers' elevators. In the 
past the farmers in establishing cooperative elevators fre- 
quently underestimated the expense and risks of the grain 
trade; they seldom hedged their transactions, and their at- 
tempts to market grain on too narrow price margins some- 
times resulted in failure. In many instances they were, more- 
over, opposed by local grain dealers and line elevator com- 
panies, by central jobbers, dealers and commissionmen, and by 
the railroads, who regarded them as "irregular." Not all the 
farmers have learned by experience since 1889 when the first 
cooperative elevator began operation,^ and consequently fail- 
ures are not uncommon at the present time. Usually, how- 
ever, the cooper ative elevator concerns are now conservatively 

*G. H. Powell: Cooperation in Agriculture, p. 127. 





organized as regularly incorporated companies or joint-stock 
associations with a capital stock varying from $2,500 to 
$20,000 and with from 70 to 225 stockholders. They usually 
buy grain in the same way that private dealers do and dis- 
tribute their profits as dividends, although when competition 
is keen they sometimes pay the primary market price less the 
freight rate, and assess operation costs against the stockhold- 
ers in proportion to the quantity of grain contributed. They 
sometimes operate their elevators in connection with flour, 
feed, coal, lumber, fertilizer, farm machinery or other local 
business so as to reduce expenses and increase their profits. 

The farmers' elevators, moreover, frequently have the ad- 
vantage of handling a larger volume of grain at a given 
shipping point than their competitors, for price considera- 
tions being alike, the stockholders desiring large dividends sell 
to their own company. The articles of incorporations in some 
cases provide that members may sell their grain to outside 
firms only upon payment to the farmers' company of one cent 
on every bushel so sold, and many farmers who are not stock- 
holders, realizing the effect which the cooperative elevator has 
upon country prices and grading, also sell to the farmers' 
company. As was previously mentioned the profits of a coun- 
try elevator are affected greatly by the quantity of grain 
handled. The stockholders, moreover, being primarily inter- 
ested in the sale of the grain which they individually grow 
are less dependent upon elevator profits than their competi- 
tors. Farmers' elevators are especially apt to be established 
at points where there is but one grain buyer, and at points 
where, although there are several buyers, the farmers are not 
convinced that they receive fair prices. 

Although the number of line and grain dealers' elevators 
exceeds that of cooperative elevators, the latter have in some 
regions made rapid progress. It is stated that in 1913 there 
were 340 cooperative elevators in Iowa, 331 in North Dakota, 
297 in Minnesota, 260 in Illinois, 225 in South Dakota, 204 
in Nebraska and 137 in Kansas. There were relatively few in 
Missouri, Oklahoma and Texas, in the grain regions east of , 
the Mississippi or in the Rocky Mountain and Pacific Coast 





states. It is estimated that in 1913 there were over two thou^ 
sand cooperative elevators operating in the United States as 
a whole, not including the cooperative grain warehouses which 
have been established on the Pacific Slope. In 1911 they han- 
dled not less than 270,000,000 bushels or about 40 per cent, of 
the grain shipped from those regions in which cooperative 
elevators have been constructed. ^ 

The principal obstacles encountered by farmers' elevators 
have been mismanagement and competition with line elevator 
companies. The handling of larger quantities of grain by the 
latter, and their ability to recoup at one point the profits 
which they sacrifice at another, gives them an advantage 
alike over cooperative and grain dealers' companies which 
ordinarily operate individual elevators. In order to over- 
come this disadvantage the farmers' companies have been 
urged to form cooperative unions. 

The Local Grain Market in the Pacific Coast Region 

The sale of grain by the farmers of the Pacific Coast 
region differs from the methods prevailing throughout the 
central western and eastern parts of the United States in vari- 
ous respects. 

Local Purchasing by Exporters. — ^While the grain export 
trade conducted through the Atlantic and Gulf ports is han- 
dled by exporters who purchase their grain at the large pri- 
mary and seaboard markets. Pacific Coast exporters frequently 
buy grain directly from the farmers. Their agents, who are 

*H. J. Waters, President Kansas State Agricultural College: 
Annual Eeport of State Board of Agriculture of Missouri, 1913, p. 

Iowa , 
N. D. 
Mo. .. 
IlL ... 
S. D. . 
Neb. . 


Kan. . . . 

.. 137 

Wis. ... 

.. 53 

Okla. ... 

.. 34 


.. 28 

Mont. . . 

.. 27 

Ohio ... 

.. 26 











Idaho .... 


Ore. , 




Total. ..2,031 

'G. H. Powell: Cooperation in Agriculture, pp. 122-123. 


scattered throughout the local markets, purchase wheat and 
barley and forward it to the ports. The exporting concerns 
then attend to the chartering of vessels, the loading of the 
cargo, the securing of marine insurance, the payment of the 
ocean freight, and the sale of the grain to the foreign im- 
porter. It was stated by the Bureau of Statistics, Department 
of Agriculture, that a large part of the grain export trade 
of the Pacific Coast is concentrated in the hands of a few 
strong firms. 

These exporters are more or less closely connected with grain 
dealers located in European markets, and who represent there 
the men who export from the United States; this relation is 
in some cases reversed — some Pacific Coast exporters are repre- 
sentatives of European firms. The European representative of 
the Pacific Coast exporter may sell a given lot of wheat before 
the exporter buys it for shipment or the exporter may buy it 
first and look for a purchaser afterwards. In either case both 
transactions are usually made within a short time of each 
other, and the exporter runs less risk of a fall in price than 
if he held his wheat a longer time before selling it.* 

The purchases made by the exporter are of particular im- 
portance to the Pacific Coast wheat and barley grower, be- 
cause the grain trade of the Pacific Slope is more largely de- 
pendent upon the foreign market than that of the grain 
regions located east of the Eocky Mountains. 

Handling of Grain, in Sacks. — Pacific Coast grain is 
mainly handled in sacks rather than in bulk. This practice, 
which in the past also prevailed in other regions of the United 
States, but which owing to its expensive and cumbersome na- 
ture has been largely abandoned, still persists in the Far 
West. Its retention is partly due to custom, but it is also due 
partly to the fear that it is not safe to load a vessel with 
bulk grain for the long voyage to European markets. One 
of the conditions of Pacific Coast marine insurance policies 
and grain-charter parties ordinarily is that grain cargoes shall 
be shipped in sacks. Since the export trade is so important 

*F. Andrews: *' Marketing Grain and Livestock in the Pacific 
Coast Region,'' Bureau of Statistics, Bulletin No. 89 (1911), p. 85. 



in the Pacific Coast grain trade, these conditions influence 
the methods of handling most of the grain of the Far West- 
domestic as well as export. The grain is sometimes sacked 
several times, for when received at the port warehouses it 
"is frequently emptied from the sacks, run through an ele- 
vator for the purpose of cleaning or mixing, and is sacked 
again for shipment.'* ^ 

Kelative Absence af Country Elevators.— There are rela- 
tively few country elevators on the Pacific Slope, the grain in 
sacks being stored in warehouses and on open platforms. The 
sacks being easily handled by hand trucks, the warehouses 
require relatively little machinery. Some of them, especially 
the large warehouses at the ports, are, however, equipped with 
steam or electrically driven conveyors for stacking and load- 
ing the sacks of grain. Grain elevators have been erected at 
various places in the Pacific Coast region, for some of the 
grain is handled in bulk, and it has also been recognized that 
elevators facilitate the cleaning and mixing of grain. 

Cooperative Growers' Associations. — Some of the grain of 
the Pacific Slope is sold through cooperative farmers' associa- 
tions. The cooperative grain ventures which have been at- 
tempted in California since 1874 have in some instances met 
with failure, but at present there is an organization in that 
state known as the Grain Growers' Association of California 
which claims to have caused higher prices to be paid to the 
growers. In Oregon, Washington, and Idaho there are nu- 
merous cooperative grain warehouses, which differ from the 
cooperative elevators of the grain regions east of the Rocky 
Mountains in that, while they are operated by separate local 
organizations, their sales are made through a central union 
whose agents sell to exporters, to mills and to dealers who sup- 
ply mills with grain. 

Price-quoting System. — A minor feature of the Pacific 
Coast grain trade is that wheat and barley prices at many 
points are locally quoted in terms of 100 pounds. In Oregon, 
Washington and Idaho, wheat prices are quoted in terms of 
bushels o f 60 pounds as in other wheat-growing regions of 

»Il>id., p. 90. 



the United States, but barley is often sold by the "cental'^ 
(100 lbs.) or by the short ton (2,000 lbs.). Pacific Coast 
wheat when exported to England is usually sold in terms of 
^'quarters" of 500 pounds, and barley in terms of quarters of 
448 pounds gross weight.^ 


(See references on pages 92, 93 designated by an *.) 
^Ibid,, p. 86. 





As the grain trade illustrates the manner in which a farm 
product grown hy a large number of farmers throughout wide 
areas is first collected and sold at local markets, so it is also 
an excellent example of how such commodities are in many- 
instances concentrated at a smaller number of large central 
markets before they are shipped to their final destination. 

The Flow of the Grain Trade 

The System of Grain Markets. — ^Most of the grain after, 
it leaves the farms passes through a series of markets and ship- 
ping points. (1) The local markets which were described in 
the preceding chapter collect the grain from the growers; (2) 
the primary markets of the interior collect most of it from 
the local markets; (3) portions of the grain shipped out of 
the primary markets are sold, transshipped, or consumed at 
the seaboard markets, which are located at the country's prin- 
cipal ports of distribution and exportation, (4) at secondary 
wholesale markets throughout the United States and (5) at 
central markets in foreign countries. (6) Much grain in 
moving out of the primary markets is, moreover, transshipped 
en route at a group of interior points where grain is trans- 
ferred rather than marketed. (7) Certain quantities of grain 
are retailed for feed or seed purposes at retail markets located 
throughout the United States or in foreign grain-importing 
countries. Much grain, however, is not retailed, but is sold 
in wholesale lots to flour and grist mills, malt houses, cereal 
manufacturers and other large consumers. 


The organized grain trade, in so far as it is conducted 
in the central markets of the United States, is principally 
confined to the primary markets of the interior and the 
seaboard grain markets of the Atlantic, Gulf and Pacific 

Geographical Location of Primary Markets. — As shown 
in Map No. Ill, a circle with its center at Peoria, Illinois, 
and its circumference drawn through Duluth and Wichita 
circumscribes all the principal primary grain markets of the 
United States. While their central western location places 
them adjacent to some of the country's greatest grain fields, 
there are vast grain-growing regions in the trans-Mississippi 
Valley, which are removed many hundreds of miles from the 
nearest primary market. They are located with special ref- 
erence to transportation facilities, for they gather their 
grain supply from the thousands of local country mar- 
kets. Most of- them are situated either on the western 
heads of the Great Lakes or on the interior waterways, 
and all of them have been supplied with abundant railroad 

From each of the primary markets numerous railroads 
radiate throughout the agricultural districts from which they 
obtain grain. Sometimes as many as twenty-five or more 
railroads, including many of the well-known Granger roads 
of the Central West, feed a single large market, and smaller 
quantities of grain are also received at some of these mar- 
kets via lake or river. Each primary market is likewise 
located so that it may readily ship grain eastward or south- 
ward. The eastern and western trunk lines, the Great Lakes, 
and to a less extent the Erie Canal, regularly carry large vol- 
umes of grain from the primary markets of the West to the 
inland and seaboard markets of the Atlantic Coast, and 
another group of railroads and certain rivers carry smaller 
quantities to the inland and seaboard markets of the Gulf of 
Mexico. The manner in which Chicago, the largest primary 
market, receives and ships its supply of grain is clearly 
shown in the following balance sheet for the year 1913 
(Table III) : 



























Illinois <k Alicliieaii Canal. 















Chicago & N. W. Ry 

Illinois Central R. R 

Chic, Rock I. & Pac. Ry. 
Chic, Burl. &Q'cyR.R.. 
Chicago & Alton R. R . . . 
Chic. ifeEast'nIlI. R. R... 
Chic, Mil. & St. Paul Ry.. 
Wabash R. R 



























Chic. Great Western R. R. 
Atch., Top. & S'ta Fe Ry. . 
Soo Line 




Elgin, Joliet & East'n Ry.. 
*East'n & S. E. lines 


Total receiots 






Flour manufactured in the 
citv restimated^ 

In store and afloat in har- 
bor, December 31, 1912 






Grand totals 







NO. Ill 






Barley, i 

Lake — ^To Buffalo 






To Erie 

To Ogdensburg . . . 


To Fairport 

To Port Huron . . , 











To other U. S. ports 






To Depot Harbor. 


To Montreal 

To Midland 


To Tiffin 

To Collingwood . . . 

To Kingston 

To Prescott 

ToPt. Colboum.. 


To other Canadian 


Totals by lake 













Chic. & Northwestern Ry. 

Illinois Central R. R 

Chic Rock. lal. & Pac Ry. 
Chic, Burl. &Q'cyR.R.. 





Chicago & Alton R. R . . . 













Chic & East'n 111. R. R. . 
Chic, Mil. & St. Paul Ry. 
Wabash R. R. (W. of Chi). 


Chi. Great Western R. R . 

Atch., Top. & S'ta Fe Ry. . 







800 Line 


■ " 1,612,666 

♦East'n and S. E. lines .... 


Total shipments 

In store and afloat in har- 
bor, December 31, 1913 

City consumption and un- 
accounted for 












Grand totals 






* The extern and southeastern lines include the Wabash R. R. (east of Chicago). 
P. Ft., W. & C. Ry., P. C. C. & St. L. Ry.. B. & O. R. R., G. T. W. Ry., N. Y. C. & 

St L^T r*^ S- ^'S- ?. 9- i I* ,f • Ry. Michigan Central R. R.. L. S. & M. S. Ry.. 
m. 1j. ity., u. & iu. R. tt., C. I. & S. Ry., aad the C. I. d L. Ry, 





The Volnme of Business at the Primary Markets. — The 
relative importance of the primary grain markets varies 
widely. The receipts of wheat are greatest at Minneapolis, 
Duluth, Chicago, Kansas City, St. Louis and Omaha ; those of 
corn at Chicago, Omaha, St. Louis, Kansas City and Peoria; 
those of oats at Chicago, St. Louis, Minneapolis, Omaha and 
Milwaukee; barley at Minneapolis, Chicago, Milwaukee and 
Duluth ; and rye at Minneapolis, Milwaukee^ Chicago and Du- 
luth. The aggregate grain receipts of the sixteen principal 
primary markets in the years 1905, 1910 and 1913 are shown 
in Table IV- The combined receipts of these markets in 1913 
reached the amazing total of 1,063,602,902 bushels. 


Receipts and SmPMENTS of Grain at Sixteen Leading Primary 

Grain Markets.* 


Receipts (in bu.) 


Chicago... . . 
Kansas City. 

St. Louis 


Milwaukee . . 



Louisville. . . 
Cincinnati . . . 


Cleveland. . . 



Little Rock. 



































1913 1 























* Includes wheat, com. oats, barley and rye Calendar Years „„ , .Q-f> 
+ TT S Monthlv Summary of Commerce and Finance, Dec, iyU5 ana lyi". 
I N*. Y. PrXce ExXnge. Annual Statistical Report (1913;) Chicago Board d 
Trade. Annual Report (1913), etc. 
§ Fiscal year 1912. 
Q Approximate. 


# » 


, During the decade ending in 1913 the annual receipts of 
grain at Chicago increased 40 per cent., at Minneapolis 47.8 
per cent., and at Kansas City and Milwaukee 52 per cent. 
The grain receipts at Duluth underwent the even more rapid 
increase of 172 per cent., those at Omaha 128 per cent., and 
those at Indianapolis 174 per cent. On the contrary the 
quantity of grain annually received at St. Louis, although it 
was in 1913 exceeded only by the receipts at Chicago, Min- 
neapolis and Duluth, increased but 17 per cent, during the 
decade. The increases at Louisville, Cincinnati, Wichita and 
Little Eock were likewise small, and the annual receipts at 
Peoria, Toledo, Cleveland and Detroit declined somewhat. 

Competition Between Primary Markets.— Each primary 
market ordinarily obtains its supply of grain from a particu- 
lar grain-growing section or sections. There is, however, ac- 
tive competition between the various markets because there is 
no large district which does not have the alternative of ship- 
ping its grain to several markets, and because the grain which 
is ordinarily shipped to a particular center may in case of 
manipulation of prices or extraordinary demand move to some 
other primary market. The relation between different pro- 
ductive areas and primary grain markets is shown in Map 
No. V. The grain from location No. 1 usually moves to 
Minneapolis and Duluth, but the railroad carriers are so situ- 
ated that in case prices for any reason get out of range the 
grain will move to Chicago. Grain produced in section No. 
2 is ordinarily shipped either to Chicago or Milwaukee, but 
slight price variations at times draw the output of the western 
portion to Minneapolis or Duluth. Region No. 3 is tributary 
to Milwaukee and to various smaller markets such as Ashland, 
Manitowoc or Green Bay. The grain produced in district 
No. 4 may move either to Kansas City, St. Louis, Omaha or 
Chicago. Territory No. 5 may ship either to Chicago or St. 
Louis, and the grain from territory No. 6 usually moves to 
St. Louis, but may move to Chicago in case prices are badly 
out of line. Eegion No. 2 A ordinarily ships its grain to 
Chicago or Milwaukee, but may also ship to other primary 
markets north or south, and the grain produced in the area 






designated 4 or 5 ordinarily moves to Kansas City, St. Louis, 
or Chicago, but may, likewise, go to other primary markets. 
The grain produced in district No. 7 usually moves either to 
Detroit or Toledo. 

The competition between the primary markets is of spe- 
cial importance to the growers and local shippers of grain, 
for it affects the prices which they receive. In practice the 
prices at the various primary markets do not remain out of 
parity for a long period of time because certain dealers or 
"arbitrageurs" buy or sell at any of the grain exchanges with 
a view to making a profit out of such price differences as occa- 
sionally occur, but their ability to conduct such transactions 
on a large scale, even though no actual shipment of grain may 
be made, depends upon the ability of numerous producing 
regions to ship grain to any one of several primary markets. 
Functions of Primary Markets. — By concentrating a large 
part of the country's available grain supply, the primary mar- 
kets of the interior make possible an organized grain market. 
They are equipped with large terminal elevators where grain 
may be stored, cleaned, mixed and otherwise handled, where it 
may be properly inspected, graded and weighed, and from 
which it may readily be shipped to all parts of the world. 
They are equipped with organized exchanges where grain may 
at all times be bought and sold in accordance with established 
rules, and where speculation may be conducted in an orderly 
manner. By concentrating large quantities of grain and by 
providing a continuous market, they facilitate the maintenance 
of a world's price for grain. The primary markets, more- 
over, that are important milling or malting centers, provide 
a final market for some of the grain which is concentrated 
in them. 

Shipping Routes. — The quantities of grain shipped out of 
the principal primary markets in 1910 is shown in Table IV. 
The primary markets as a whole have in recent years shipped 
from 60 to 65 per cent, of their receipts, the remainder being 
locally consumed. The proportion of the receipts shipped out 
of Chicago, Duluth, St. Louis, Kansas City, Omaha and Pe- 
oria is, however, greater than the average for all the primary 

Map V. — Tekritobial Competition among Primary Grain Markets. 


rT*fr*lt\f »nta BafartMnt. 


1. Tributary, as a general rule, to Minneapolis and Duluth. At ex- 
traordinary times wheat from this territory moves to Chicago. 

2. Wheat from this location moves to either Chicago or Milwaukee. 
At times, however, western portion will go to Minneapolis or Duluth. A 
portion of the territory is extremely close and a slight variation will take 
it away from one market to another. 

3. Wheat from this location is naturally tributary to Milwaukee, Ash- 
land, Manitowoc, or Green Bay. 

4. Wheat from this location is tributary to Kansas City, St. Louis, or 
Chicago. A slight variation in prices will take it away from one market to 

5. Territory is tributary to either Chicago or St. Louis. Any slight 
variations in the market will pull from one to another. 

6. This territory tributary to St. Louis, unless Chicago market is out 
of line. 

7. Wheat from this territory as a general rule goes to Detroit or Toledo. 
2A. Wheat from this section moves primarily to Chicago or Milwaukee, 

but is also quite liable to go to other markets north or south. 

4 or 5. Wheat from this section moves primarily to Kansas City, St. 
Louis, or Chicago, but may go to other markets. 





designated 4 or 5 ordinarily moves to Kansas City, St. Louis, 
or Chicago, but may, likewise, go to other primary markets. 
The grain produced in district No. 7 usually moves either to 
Detroit or Toledo. 

The competition between the primary markets is of spe- 
cial importance to the growers and local shippers of grain, 
for it affects the prices which they receive. In practice the 
prices at the various primary markets do not remain out of 
parity for a long period of time because certain dealers or 
"arbitrageurs" buy or sell at any of the grain exchanges with 
a view to making a profit out of such price differences as occa- 
sionally occur, but their ability to conduct such transactions 
on a large scale, even though no actual shipment of grain may 
be made, depends upon the ability of numerous producing 
regions to ship grain to any one of several primary markets. 

Functions of Primary Markets. — By concentrating a large 
part of the country's available grain supply, the primary mar- 
kets of the interior make possible an organized grain market. 
They are equipped with large terminal elevators where grain 
may be stored, cleaned, mixed and otherwise handled, where it 
may be properly inspected, graded and weighed, and from 
which it may readily be shipped to all parts of the world. 
They are equipped with organized exchanges where grain may 
at all times be bought and sold in accordance with established 
rules, and where speculation may be conducted in an orderly 
manner. By concentrating large quantities of grain and by 
providing a continuous market, they facilitate the maintenance 
of a world's price for grain. The primary markets, more- 
over, that are important milling or malting centers, provide 
a final market for some of the grain which is concentrated 
in them. 

Shipping Routes. — The quantities of grain shipped out of 
the principal primary markets in 1910 is shown in Table IV. 
The primary markets as a whole have in recent years shipped 
from 60 to Go per cent, of their receipts, the remainder being 
locally consumed. The proportion of the receipts shipped out 
of Chicago, Duluth, St. Louis, Kansas City, Omaha and Pe- 
oria is, however, greater than the average for all the primary 

Map V. — Territorial Competition among Primary Grain Markets. 

I w i ^raj.. 


fr«»»r«irV» Or«tii Bttrfnt, Arsaur * 

Co. (1914). 


1. Tributary, as a general rule, to Minneapolis and Duluth. At ex- 
traordinary times wheat from this territory moves to Chicago. 

2. Wheat from this location moves to either Chicago or Milwaukee. 
At times, however, western portion will go to Minneapolis or Duluth. A 
portion of the territory is extremely close and a slight variation will take 
it away from one market to another. 

3. Wheat from this location is naturally tributary to Milwaukee, Ash- 
land, Manitowoc, or Green Bay. 

4. Wheat from this location is tributary to Kansas City, St. Louis, or 
Chicago. A slight variation in prices will take it away from one market to 

5. Territory is tributary to either Chicago or St. Louis. Any slight 
variations in the market will pull from one to another. 

6. This territory tributary to St. Louis, unless Chicago market is out 
of line. 

7. Wheat from this territory as a general rule goes to Detroit or Toledo. 
2A. Wheat from this section moves primarily to Chicago or Milwaukee, 

but is also quite liable to go to other markets north or south. 

4 or 5. Wheat from this section moves primarily to Kansas City, St. 
Louis, or Chicago, but may go to other markets. 




markets, while in the case of Minneapolis, Louisville, Cincin- 
nati, Toledo, Cleveland, Detroit, Wichita and Little Rock it 

is IGSS 

The shipments may reach the seaboard and interior mar- 
kets of the East over various routes: (1) The grain may 
move over the all-rail route, for all the eastern trunk hues 
conduct a grain-carrying business. (3) It may niove east- 
ward over the lake-rail route. Much gram is regularly trans- 
shipped from railway cars and elevators to lake earners at Chi- 
cago Milwaukee, Duluth and various smaller transshipment 
points on Lakes Superior and Michigan, and after arriving 
at Buffalo or other minor grain-receiving ports such as i^rie, 
Ogdensburg or Fairport, is again transshipped from the lake 
to the rail carriers. (3) It may move to the Bast over the 
lake-canal route, the grain being t'-ansshipped to E„e Canal 
boats or barges at Buffalo. (4) At certam Lake Michigan 
points grain is transported across the lake by so-called transit 
lines "^ Two classes of vessels are used in the transit service, 
one consisting of ordinary grain vessels which transship gram 
in bulk through elevators from various points on the western, 
to various points on the eastern shore of Lake Michigan and 
the other of car ferries which carry across the lake in railroad 
cars loaded with grain. In either case the grain is carried 
to the eastern markets by rail. The shipping PO'nts include 
Milwaukee and smaller ports such as Manitowoc, and the re- 
ceiving ports include points such as Ludington Muskegon, 
Frankfort and Grand Haven, Michigan. (5) Certain quanti- 
ties of American grain are exported to European markets via 
the Lake-St. Lawrence River route. Montreal is of «* *e 
tgeft eastern grain ports, receiving over 50,000,000 busheb 
annually. Most of these receipts, however, consist of Ca- 
nadian grain, the export of American grain through Canada 
in 1914 amounting to only 6,821,000 bushels. 

The all-rail shipments predo minate at those primary mar- 

•" Grain Movement in the Great Lakes Region," Bureau of Sta- 
♦i«tiBR (^Deoartment of Agriculture), Bulletin 81, pp. Mil. 
*"*".e1 export of forei^ grain as reported in the Annual Beport 
of the Dominion of Canada on Trade and Navigation (1914), P- 217. 


( '^ 


kets which are not located on the Great Lakes, and also at 
Chicago, which is so situated that the railroads need not make 
a lengthy detour in order to reach the eastern grain markets. 
The shipments from Chicago respectively by lake and rail 
are shown in Table III. The lake-rail route predominates at 
the various lake shipping points extending from points north 
of Milwaukee to Duluth, for at these points the lake-rail route 
has a pronounced geographical advantage. At Milwaukee the 
shipments are more evenly divided between the lake and rail 
routes. The volume of grain transshipped eastward via the 
Erie Canal has steadily declined in recent years, less than 
9,500,000 bushels being shipped from Buffalo by canal in 
1913, and less than 4,500,000 bushels arriving at tidewater 
over the canal route. In that year the total grain receipts at 
New York, the largest seaboard market, aggregated 94,625,- 
020 bushels, 37,551,450 bushels arriving via the all-rail route, 
including the grain transshipped across Lake Michigan by 
the transit lines, 48,893,125 via the lake-rail route, 4,371,700 
by canal, and 3,808,745 by various river and coastwise water 
routes.^ The average freight charges per bushel of wheat 
from Chicago to New York have during the years 1900 to 
1913 varied from 9.60 to 11.70 cents on the all-rail route, 
from 5.02 to 7.01 cents on the lake-rail route, and from 4.42 
to 6.68 cents exclusive of Buffalo charges on the lake-canal 

The movement from the primary markets to the seaboard 
markets of the Gulf is mainly an all-rail movement. Small 
quantities are shipped southward on the Mississippi-Ohio 
River system, but since 1903 such shipments have not ex- 
ceeded 400,000 bushels annually. 

Milling-in-transit. — Much grain shipped to mills is han- 
dled on so-called milling-in-transit privileges, the carriers 
granting a through rate to final destination even though the 
grain is unloaded en route and converted into flour and food- 
stuffs. Certain precautions are taken to avoid the abuse of 

p. 9. 

* New York Produce Exchange, Annual Statistical Beport {191Z), 
"Statistical Abstract of the U. S. (1913), p. 297. 


the privilege, for the through rate rightfully applies only to 
such weights of flour and foodstuffs as are the equivalents of 
the grain to which the privilege was extended subject to rea- 
sonable allowances for natural shrinkage in weight resulting 
from milling. The milling-in-transit privilege in case of inter- 
state shipments is subject to supervision by the Interstate 
Commerce Commission. It may be granted free of charges 
other than the regular freight rates, or special charges may be 
collected but the Commission has ruled that such charges 
must be' reasonable and that no unfair discriminations or 
fraud may legally be practiced in its administration. 

The Seaboard Markets.— The grain receipts and exports of 
the principal seaboard markets are shown in Table V. On 
the eastern seaboard there are New York, Baltimore, Phila- 
delphia, Boston, Portland (Maine) and Newport News; on the 
Gulf New Orleans and minor grain-shipping ports such as 
Galv'eston, Mobile, Port Arthur, Sabine and Pensacola; and 
on the Pacific Coast, Puget Sound ports, San Francisco and 
Portland, Oregon. Grain is also exported by lake through 

Receipts and 

Exports op Grain* at Leading Seaboabd MARKETsf 


New York 


Philadelphia. . 


New Orleans . 
San Francisco. 
Puget Sound . 
Portland, Ore. 



Receipts att 







from 1913 









* Includes wheat, corn barl^. oats and rye j, . . , PeDorts; U. S. Monthly 
+ Prom New York Produce Exchange, Annual biatisucai 'V^i'^} *'°; ^'"'. noi^V- 

Summa^ of Commerce and Finance; U. f. Commerce and NavxgaUon Report (1913). 

mSSs Exchange of St. Louia, Annual Reports. 
t Calendar Years. 



the Welland Canal and via the St. Lawrence River from Chi- 
cago, Duluth, Detroit and other Great Lake ports. 

The large eastern seaboard markets distribute grain 
throughout the East, export grain to foreign markets, and act 
as ports through which grain exported from the interior is 
shipped abroad. To accomplish these functions they are 
equipped with terminal elevators and organized grain ex- 
changes in much the same way that the primary markets are 
equipped. Their principal grain business is gradually becom- 
ing one of domestic distribution rather than of foreign ex- 
ports, for the entire grain-export trade of the United States 
has declined from 378,686,000 bushels in 1900 to 193,786,000 
in 1913. The European War has caused a temporary in- 
crease in exports, but the home needs for grain. and flour have 
during the twentieth century increased more rapidly than 
the country's grain crop. 

The Pacific seaboard markets, in addition to domestic dis- 
tribution and foreign exportation of grain, also act as pri- 
mary, and, in many instances, as local grain markets. As 
was described in the previous chapter, the system of grain 
marketing on the Pacific Slope differs widely from the system 
prevailing east of the Rocky Mountains. There are no pri- 
mary markets in the interior of Washington, Oregon and Cali- 
fornia, the grain being shipped directly from the local ship- 
ping points to the seaboard markets over rail or river routes. 
It is there sold to local consumers, is distributed to western 
markets by rail or coastwise carriers, or is exported to Euro- 
pean and Oriental markets. Some Pacific Coast grain, chiefly 
barley, is shipped to the eastern markets of the United States, 
and it is possible that somewhat larger quantities will be 
shipped to those markets now that the Panama Canal has 
been opened to sea-going vessels. 

Activities and Management of Terminal Elevators 

N"o mechanism of the primary grain markets is so im- 
portant as the terminal elevator system. It has indeed been 



stated that ^^the history of the primary market has heen the 
history of the terminal elevator systems/' 

The Functians of Terminal Elevators. — The terminal ele- 
vators are the country's greatest grain storehouses. Their 
principal function is to provide storage facilities for much of 
the vast quantities of grain which are sold by the growers 
during the months immediately following the harvesting sea- 
sons and most of which cannot find storage in the relatively 
small country elevators. Public terminal elevators store grain 
for their owners who are mainly grain dealers, and also for 
any other persons who desire to store grain subject to the 
charges and conditions imposed by the state, the grain ex- 
changes and the elevator companies. Private elevators — those 
connected with mills, malt houses, linseed oil companies and 
other industrial concerns or grain interests and not open to 
the public — also store great quantities of grain for the con- 
cerns which own or operate them. 

Terminal elevators, moreover, facilitate the shipment of 
grain, for many of them have both rail and water connections 
and all of them are so connected with the railroads that cars 
arriving from or destined to any part of the country can 
readily be switched to or from them. The elevators are so 
equipped that grain in bulk can rapidly and at little cost be 
loaded into or unloaded from railroad cars or vessels. Some 
of them are specially constructed to transfer grain from rail- 
road car to lake vessel or in the opposite directions. They 
also facilitate the inspection, grading and weighing of grain, 
and some of them the cleaning, drying and mixing of grain. 
They promote the work of the grain exchanges and the vari- 
ous functions of primary markets which were previously men- 
tioned. {See page 56.) The central elevators located at 
inland transfer points such as Buffalo, and at the seaboard 
markets, perform the same functions as those located at the 
primary markets of the interior, but in some cases their prin- 
cipal use is the transfer rather than the storage of gr^in. . 

Construction and Capacity of Terminal Elevators.— In or- 
der to perform their various functions expeditiously it fol- 
lows that the terminal elevators must be larger than the qoun- 


try elevators from which they obtain their supply of grain, and 
that they must be equipped with a view to handling and 
storing larger quantities of grain. Twenty-two of the ele- 
vators of Chicago, for example, have a storage capacity of one 
million or more bushels each, and one of them has a capacity 
of three and another of five million bushels. Terminal ele- 
vators are designed in widely varying ways, and many of those 
built during the last decade are models in design, equipment 
and construction. They are variously built of steel, concrete, 
brick and stone. Their equipment may be driven with elec- 
tricity or steam, they may receive railroad cars alongside or 
within tunnels, and their storage bins may be provided within 
the main structure or partly within annexed storage tanks or 
towers. They are variously equipped with hoppers, endless 
chain carriers, belt conveyors, power shovels, grain spouts, 
scales, cleaning machines, dryers, blowers and scouring plants. 

The total elevator capacity of Chicago is nearly 59,000,000 
bushels, of Minneapolis nearly 41,000,000, Duluth over 32,- 
250,000, Milwaukee 15,500,000, St. Louis 12,000,000, and 
Kansas City 11,250,000. Buffalo, being the principal point of 
transfer for lake grain, has an elevator capacity of over 
22,000,000 bushels. The elevator capacity of the eastern sea- 
board markets is less than that of the primary markets of 
the interior, because their need for vast storage capacities is 
smaller. Not only do they handle smaller quantities of grain, 
but much of the grain exported merely passes through their 
elevators as a means of transfer from railroad car to ocean 
carrier. The elevator storage capacity of New York is 11,- 
305,000 bushels, of Baltimore 5,100,000, of New Orleans 5,- 
180,000, and of Philadelphia 4,388,000. 

Elevator Ownership. — Prior to 1887 the public elevators 
of Chicago were mainly owned or operated by the grain-carry- 
ing railroads and by warehousemen. In either case they were 
operated by concerns whose sole interest in them was the 
warehousing or transfer of grain. About 1885, however, 
the railroads made rules permitting the sale of grain in the 
cars. They allowed twenty-four hours for inspection and sev- 
enty-two hours for its removal from the cars, and their former 






demurrage charges were diseontiniied. The amount of track 

selling and selling by sample, and the volume of grain passing 

through Chicago without being unloaded then became so large 

that the railroads centering at Chicago and owning elevators 

and other expensive terminal properties there were confronted 

by a threatening situation. At the same time the southwest 

movement of the winter wheat and corn districts and the 

movement iof export grain to the Gulf began to favor St. Louis, 

and the newer markets of the trans-Mississippi Valley, and 

the northwest movement of the spring wheat belt favored 

Minneapolis and Duluth. The railroads centering at Chicago, 

fearing the Interstate Commerce Act, which was enacted in 

1887, and the probability of hostile public sentiment, did not 

feel able to return to the old regulations which had practically 

compelled the storage of grain in their terminal elevators. 

They therefore decided to sell or lease their terminal elevators, 

as well as such country elevators as they owned, to various 

central grain dealers. Since it would be to the interest of 

these dealers both as grain dealers and as elevator concerns 

to fill their elevators with grain, the position of Chicago as a 

grain market and the grain traffic of the railroads would be 

maintained. By 1894 the shifting of public elevators from 

railroads and warehousemen to grain dealers had been largely 

accomplished, and thereafter the elevator concerns controlled 

a large share of the grain trade of Chicago. 

At present most of the public elevators in other primary 
markets as well as in Chicago are operated by large grain 
dealers. Some elevators are still operated by concerns which 
are primarily in the business of warehousing, and the rail- 
roads, also, operate some of the public elevators at the pri- 
mary and seaboard markets and at transshipment points. 
Railroad ownership is confined mainly, though not entirely, to 
large transfer elevators used to transship grain to or from 
railroad cars, lake vessels, canal boats and ocean carriers. 

In addition to the public elevators, there are many pri- 
vate elevators which do not conduct a public warehousing 
business. They are owned and operated principally by flour 
and grist mills, malting, cereal food, linseed, yeast and other 



industrial concerns, and by grain dealers who use them solely 
in their own grain business. 

Since the elevators at the primary markets are owned or. 
operated by a relatively small number of warehousemen, most 
of whom are grain dealers, the amount of competition withm 
any one of the primary markets is smaller than it was in the 
past, when the bulk of the grain stored in the elevators was 
owned by a large number of dealers who did not own elevator 
properties. The amount of competition has, moreover, at 
times been further controlled at some of the primary markets 
and transshipment points by the formation of elevator asso- 
ciations, pools or combinations.^ That such cooperation has 
been generally practiced at all the large grain markets, or that 
it has had a general effect upon grain prices, has not been 
established. The reduced competition within the individual 
grain markets is largely counterbalanced by the competition 
which exists between the primary markets. 

Eegulation by the States.— Public terminal elevators are 
in some states subjected to state regulation in much the same 
manner that the charges and services of common carriers are 
publicly controlled. The railroad and warehouse laws of Min- 
nesota define public elevators as ''all elevators or warehouses 
located within the switching limits of St. Paul, Minneapolis 
and Duluth, and other points in the state which are now or 
may hereafter be designated as terminal points in which grain 
is received for storage in bulk, and that of different owners 
mixed together or so stored that the identity of the different 
lots or parcels is not preserved.'' ^ j^ Illinois public elevators 
are divided into three classes, the extent of public regulation 
varying for the different classes. Class "A" includes all ware- 
houses and elevators located in cities of at least 100,000 in- 

^See Proceedings of N. Y. Barge Canal Terminal Commission, 
vol i- ''Grain Exchanges,'' Hearings before House Committee on 
Euies'on House Eesolution 24, Mar. 3-7, 1914; Testimony taken by 
Interstate Commerce Commission Oct. 15, Nov. 23, 1906, in matter 
of Eelations of Common Carriers to the Grain Trade, Senate Docu- 
ment 278, 59th Cong., 2d Sess.; and Eeport ot Bureau of Corpora- 
tions on Transportation by Water, Part II. 

'General Statutes, Minnesota (1913), chap. 28, Sec. 4435. 




habitants and in which grain is stored in hulk, and grains 
of different owners are mixed together, or their identity is 
lost. Class "B" includes all other elevators and warehouses 
where grain is stored in bulk and is mixed together; and 
Class "C includes all other elevators and warehouses where 
property of any kind is stored for pay.^ The grain inspection 
and weighing law of Missouri defines public warehouses as 
'^all buildings, elevators or warehouses located in any territory 
wherever grain inspection and weighing may be established 
by the state board of railroad and warehouse commissioners, 
in accordance with the provisions of this article, owned or 
operated, or which hereafter may be owned or operated by any 
person or persons, association, co-partnership or corporation 
and used for storing, transferring, handling or mixing the 
grain of different owners." ^ The three definitions given serve 
to illustrate that public elevators are more comprehensively 
defined in some states than in others. All the definitions, 
however, include the elevators of primary grain markets in 
which grain of different owners is stored in bulk and mixed so 
that its identity is lost. 

The methods and extent of the control exercised by the 
states over public terminal elevators varies. It is a common 
practice, however, (1) to prohibit all discrimination in charges 
and services; (2) to require public elevators to receive all 
grain offered to the extent of their capacity, subject to reason- 
able exceptions as to damp, musty or other grain not in proper 
condition for storage; (3) to prohibit the mixing of different 
grades or otherwise transferring grain belonging to persons 
other than the proprietors of the elevators; (4) to require the 
licensing of public elevators and the bonding of elevator con- 
cerns; (5) to require the posting of elevator charges at stated 
times and to prohibit their increase during the following year ; 
(6) to permit grain owners and inspectors to examine stored 
grain at any reasonable time; (7) to establish the lien which 
the warehouseman has on stored grain in case of failure to 
pay storage or other l awful charges; and (8) to place the 

» Illinois Statutes (1913), chap. 114, Sec. 8965. 

' Inspection and Weighing Act of April 12, 1907, Sec. 7625. 


public elevators at the primary markets under the general 
supervision of the state railroad and warehouse commission, 
public utilities commission, or other public authority, as to 
maximum elevator charges, the establishment of grades and 
grading rules, inspection and weighing fees, licensing and 
bonding, rules for the receipt, care and delivery of grain, 
rules for the issue, registration and cancelation of ware- 
house receipts, and certain other matters affecting the grain 

(9) Public terminal elevators are commonly required to 
post or publish a weekly statement of the amount of each kind 
and grade of grain in store at the close of the previous week, 
and to file a similar statement with a specified public official. 
Each public warehouseman is also required to make a daily 
report to the same official of the following information : 

The amount of each kind and grade of grain received in 
store in such warehouse on the previous day, also the amount of 
each kind and grade of grain delivered or shipped by such 
warehouseman during the previous day, and what warehouse 
receipts have been canceled, upon which the grain has been 
delivered on such day giving the number of each receipt, the 
amount, kind and grade of grain received and shipped upon 
each, also how much grain, if any, was so delivered or shipped 
and the kind and grade, for which warehouse receipts had not 
been issued and when and how such unreceipted grain was 
received by them, the aggregate of such reported cancellations 
and delivery of unreceipted grain, corresponding in amount, 
kind and grade with the amount so reported delivered or 
shipped. They shall also, at the same time, report what re- 
ceipts, if any, have been canceled, and new ones issued in their 
stead as herein provided for. And the warehouseman making 
such statements shall, in addition, furnish the card registrar any 
further information regarding receipts issued or canceled that 
may be necessary to enable him to keep a full and correct 
record of all receipts issued and canceled, and of grain re-' 
ceived and delivered.* 

A copy of the daily report of grain shipments required in 
Chicago is shown in Form No. 1. 


» Illinois statutes (1913). 




(10) A common requirement is that the grain received at 
and shipped out of the puhlic terminal elevators shall be 
graded and the inspection certificates issued exclusively by 
state grain inspectors.^ 

(11) The weighing of grain at the elevators is ordinarily 


ttrntUH. t-U- SM. <M« 

PAlirV RTATEMKNTof., ...,,..,....-..-.. _„...,. ., ., . 

■ttdc to the Warehouse 

Rctfiotrar Chmir' *'^- of the unount of «»ch kind ind erade of gnin 

deliveied or shipped by us on this day. Alio a latemcnl of the Wirehouse Receipo tha have been cancelled br us, 
upon which the pain haa been delivered, on fuch dar. Also the amount, kind and grade of pain to delivered or thipped for which 
Warehouse Receipts had not been itsuied, and when and how such uhfcceipted giain was rcceivtd bjr ut. Abo a dcsciipiioii of 
such fcceipa as have been cancelled bjr us and new ones issued in their stead. 




"■ DATS 1 



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" DATE 1 



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placed under state control to some extent. The scales are 
usually subject to state inspection, and the maximum weigh- 
ing charges regulated by law or authorized public authority. 
In some states t he grain bought and sold at the primary mar- 

'^8ee chap. xiii. * 




.pro.*,* 5^^^, 


imilAL I fLACS 



CtrtUM Correct §s WejgMia U^er Sciks. 

cno mtn wttomAna. 


Mi ittmm, s>^>ifc>itellii 


kets is weighed by, and weight certificates are issued by, state 
weighmasters. Form No. 2 contains the reproduction of a 
weight certificate such as is issued by the state of Missouri. 

-Ba« u«_ 

Condition Blank. 



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(12) The weighmasters or grain inspectors are in some 
states required to make reports, either on the back of the 
weight certificate or on a separate blank, showing the condi- 
tion of the grain cars weighed. A reproduction of the "report 
of defective and leaky condition of cars" required from the 


mwa. at 

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PfCSCfucu lur 

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meoator. 1 


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Ut« HpanM ibMt (oc each ll<i 
Do not put ipecial-tHn ind r||(U 








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1 — 


Form 5 


deputy weighmasters at Chicago by the State Grain Inspec- 
tion Department of Illinois is contained in Form No. 3. 

(13) Public grain elevators are commonly required to 
issue elevator or 'Varehouse receipts'' covering all the grain 
publicly stored in them. The grain states usually have laws 
either permitting or requiring the issue of negotiable or trans- 
f errable warehouse receipts, and in some states the receipts are 

FFICl! Ota 

N? 3525 



,To the Deputy State Grair Inspector in charge of 


You are hereby authorized to inspect Out of said elevator 
.bushels o f i ■ ' 

r accounttoL. 



arehpuse Receipts for same having been sumped "Registettd for Cancellation." 
This order must be held as your authority pj abov 
Very respcctfull 

This Order MUST BE j^?,;^/^,^, , ,^j 




Form 6 (front) 

negotiable unless plainly marked otherwise. Upon the presen- 
tation of properly indorsed negotiable receipts which were 
issued for grain stored in bulk and mixed with other grain of 
the same grade so as to lose its identity, the elevatormen are 
required to deliver grain of the grade specified in the receipt. 
When, however, grain is stored in special bins so as to retain 
its identity, and in some states such bins must be provided 
when requested by owner of the grain, a special warehouse re- 
ceipt is required and the grain delivered must be the identical 
grain for which the receipt was issued. 

The grain states penalize severely the fraudulent issue of 
warehouse receipts, but for further precaution some of them 
in addition require that they shall be registered with a state 




grain registrar at the time of issue, and be canceled by him 
upon delivery of the grain which they represent. The public 
elevators of Chicago are required to report all receipts issued 
within twenty-four hours to the State Registrar upon Form 
No. 4. They are prohibited from delivering any grain upon 



M.-»tWli !■ ^11 Itt.. 



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Titt. .. 1t» 

■ OE|^y SlAtc Crmls latyectar 

Form 6 (back) 

such receipts unless they are stamped or plainly marked 
"registered for cancelation/' and after the grain has been de- 
livered the elevatormen are within twenty-four hours re- 
quired to report the canceled receipts to the Registrar on 
Form No. 5. The grain, moreover, may not be delivered be- 
fore it has been "inspected out" of the elevator by a state grain 
inspector, who acts upon receipt of an "order" from the Regis- 
trar (Form No. 6). Should it be desired to reissue any out- 




standing receipts, or "split" them, i. e., issue several new for 
one outstanding receipt, the old receipts must be duly can- 
celed and must be reported to the Registrar on Form No. 7. 
The jorm of warehouse receipts is in some states fixed by 
law. The warehouse receipt acts of Minnesota (1913) and 









n. < <!.:. Di L 1 D.ii:.»_i>:._ ^^t^t^ 














. _ ., _ . , . 









Form 7 

Illinois (1907), for example, provide that the receipts shall 
contain the following provisions : 

1. The location of the warehouse in which the grain 

, is stored. 

2. The date of issue. 

3. A consecutive number. 

4. A statement whether the grain received will be de- 
livered to bearer, to a specified person, or to a 
specified person or his order. 

5. The rate of storage charges. 

6. A description of the goods or packages stored. 

7. The signature of the warehouseman or his agent- 



8. If the receipt is issued for goods of which the ware- 
houseman is owner, either solely or jointly or in 
common with others, the fact of such ownership. 

9. If negotiable, a statement of advances made and lia- 
bilities for which the warehouseman claims a lien. 

These statutes provide that other provisions may be con- 
tained in a warehouse receipt, but that such provisions may not 
be in violation of any laws of the state and may not release 
the warehouseman from the exercise of reasonable care. In 

Form 8 

addition to the direct requirements of the Illinois statute, the 
elevators of Chicago were by order of the Railroad and Ware- 
house Commission, issued September 7, 1911, required to 
print or stamp upon their receipts the words : ^'This receipt 
should be reported and registered with the Registrar of the 
Illinois Grain Department of the Railroad and Warehouse 
Commission within 24 hours after its issue." 

A typical St. Louis negotiable warehouse receipt, showing 
state registration and cancelation, is reproduced in Form 
No. 8. 

Regulation by Grain Exchangees. — The terminal elevators 
of the primary markets are regulated not only by the states, 
but also by the grain exchanges under whose auspices most of 
the grain trading at these markets is conducted. While ele- 

yator rules of the exchanges differ, those of the Chicago Board 



of Trade may be regarded as typical. The exchange rules 
applicable in Chicago divide public elevators into two classes : 
(1) regular elevators, the grain of which is deliverable upon 
Chicago Board of Trade contracts, and (2) elevators not regu- 
lar, the grain of which is not so deliverable. In order that 
elevators may be declared regular they must conform to the 
following code of rules : 

1. Their proprietors or managers must be of unques- 
tioned financial standing and credit. 

2. Regular elevators must be so situated that they may be 
conveniently approached by vessels of ordinary draft and must 
be connected with one or more eastern railroads. 

3. They must be provided with modern receiving, 
handling and shipping appliances. 

4. They must cooperate with the warehouse receipt regis- 
tration system provided by law. 

6. They must promptly report damage to grain in store. 

6. In case of change of condition or evasion of Board 
requirements, they may at any time be removed from the list 
of regular elevators. 

7. Certain special rules are provided for elevators storing 

8. Regular elevators must permit duly authorized ex- 
change committees to examine their books and records in 
order to ascertain the stock of grain and flaxseed in store. 

9. Their warehouse receipts must not voluntarily be 
made regular for delivery upon other exchanges. 

10. All grain received in or shipped out of them must be 
weighed by the official Board of Trade weighmaster. 

The Board of Trade may in case of emergency declare any 
elevators, vessels, or other places in Chicago suitable for 
storage to be temporarily regular. It has also fixed the maxi- 
mum storage charges of regular elevators ; it regulates the life 
of the warehouse receipts accepted for regular deliveries; it 
publishes the incomes of all regular elevators ; and it posts any 
irregularities which may arise. 

The Board operates a "Grade Sampling and Seed Inspec- 
tion Department/^ which in cooperation with the state grain 



inspectors, as far as practicable, obtains samples of all graded 
grain stored in elevators or arriving in cars. It maintains 
standard grain samples, it takes up with the State Inspection 
Department any instances of improper grading of grain which 
it may discover, and it grades flaxseed in accordance with 
grades and grading regulations adopted by the Board. 

The Chicago Board of Trade also maintains a Weighing 
Department and a Custodian Department, both of which are 
under a Chief Weighmaster and Custodian. The former de- 
partment weighs the grain shipped into and out of the ele- 


^.90UP oT z rAo r nmi CHICAGO** 
rnx^S "^haf car<9 &s sspeci/ied below were weigfied 
under ihe <supervi>sion of T^o^n-ty'Wi%ijTi>n«*i «< 

J. ROSeillSlni OmtV "B," and ihai ihe vrcighis ^hown hereon are corrcei 





Form 9 

vators and issues weight certificates. The custodian service 
which has been extended to nearly all important elevators 
keeps a record of Board of Trade weights, issues certificates 
showing the weight of grain unloaded from cars into elevators, 
prevents the ^^oading ouf of grain until the elevator manager 
surrenders the properly indorsed certificates for cancelation, 
and cancels certificates to cover the amount of shrinkage inci- 
dental to the handling, cleaning and clipping of grain and any 
variations between the weight of grain at the time it is un- 
loaded and when it is shipped out of the elevators. Copies of 
the weight and custodian certificates issued under the juris- 
diction of the Chicago Board of Trade are reproduced in 
Forms 9 and 10. 


The extent to which terminal elevators are regulated by 
the grain exchanges depends somewhat upon the amount of 
control exercised by the states. When the states perform the 
weighing, inspection, and grading of grain, and the registra- 
tion of warehouse receipts, and when they extensively regulate 
the form of warehouse receipts, the keeping of records, the 
filing of reports, and the liabilities, duties, and facilities of 
elevators, the elevator rules of the exchanges are less compre- 
hensive than in states where there is little public control. 

It is for this reason that the exchanges at the seaboard 
markets regulate the grain elevators in greater detail than do 



Oastodlan D^parimenl of Ihe Board off Trodo 


Chicago, Dfino^ 


J Hereby Certify, That this day aU 

Centrar Elevator A 

-the content! 

of the car specified bdow was ijnloaded under the supervision of this Department which will not be 
loaded out except upon surrender of this receipt for cancellation as provided in the rules and r^;ula- 
tioos of the Board of Trade of the City of Chicago, governing the Custodian Department 






li ^ 

l^ *► 1 




Form 10 

the exchanges at the primary markets of the interior. The 
New York Produce Exchange, for example, provides in- 
spectors to perform the inspection and grading of grain, 
weighmasters to do the weighing, and a registrar to keep ac- 
count of the issue and cancelation of the receipts issued by 
regular elevators and of all grain received and delivered at such 
elevators. The exchange establishes the grades and grading 
rules of the port ; it regulates the mixing of grain ; it provides 
for daily elevator reports, for the examination of stored grain 
by its owners or by inspectors, and for immediate notice of 
grain in poor condition. 

The form of warehouse receipts, which in many of the pri- 



mary markets is established by state laws, is ia New York 
determined by the Exchange. Instead of one general ware- 
house receipt for grain stored in bulk and the identity of 
which is lost, various forms are issued in New York. The 
regular New York receipt for graded grain stored in indi- 
vidual elevators is shown in Form No. 11, and is similar to 
receipts required in the western grain states. A different re- 
ceipt is issued when graded grain is delivered into a '^system" 
of two or more elevators operated by one warehouse concern. 
Such a receipt, a reproduction of which is shown in Form 
No. 12, does not specify the particular elevator in which the 
grain is stored. A third kind of warehouse receipt is issued 
for grain store(? in the transfer elevators owned by some of 
the railroads centering at New York. This receipt, a copy of 
which is reproduced in Form No. 13, permits delivery afloat 
at elevators' option and is issued in accordance with an agree- 
ment between the New York Produce Exchange and the rail- 

Federal Regulation. — Elevators used in connection with 
the interstate transportation of grain are subject to control by 
the Interstate Commerce Commission. In practice the Com- 
mission has confined itself mainly to the prevention of undue 
discrimination in so-called elevator allowances, which the rail- 
roads sometimes pay to elevator concerns at transfer points 
for the transshipment of grain. The allowances may be in 
the form of so much per bushel or one hundred pounds of 
grain handled, of a lease of railroad elevators to the concerns 
free of charge or at favorable terms, or in some other form. 
The United States Supreme Court has upheld the payment 
of reasonable allowances for services rendered, but the Inter- 
state Commerce Commission has the power to prevent undue 
discrimination in the payment of any allowances for elevation, 
transfer, mixing, cleaning, clipping, drying, weighing, storage, 
^loading out,'' or other interstate elevator service.^ 

Sources of Elevator Profits. — The income of the terminal 
elevator concerns is derived from different sources. As public 

^See 222 U. S. 42. For I. C. C. decisions sec 12 I. C. C. Eep. 112, 
15 I. C. C. Kep. 326, 17 I. C. C. Rep. 192, and 18 I. C. C. Rep. 664. 







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warehousemen they are paid storage charges, the maximum of 
which is limited by the states or by the grain exchanges. At 
Chicago, for example, the maximum charges are 1 cent per 
bushel for the first ten days and ^^ of a cent per day there- 
after. Grain stored in public elevators at some markets may 
also be placed into separate bins upon request of the grain 
owner, in order that it may be cleaned, mixed, dried or other- 
wise improved, and the warehousemen are entitled to pay for 
such services. The income from this latter source is small, 
however, because grain owners seldom avail themselves of this 
privilege. The profits of the warehousemen, who deal in 
grain, are mainly derived from the sale, storage and handling 
of grain which is owned by them. As grain dealers they ob- 
tain a profit by purchasing grain at one price and selling it 
at a higher price. They also mix grain in their private ele- 
vators or in private bins, so as to raise the grade of a part 
of. the poor grades of grain purchased from the farmers or 
country dealers. Grain stored in elevators is subject to at 
least two inspections — an ^^in-inspection" at the time it is 
loaded into the elevators, and an "out-inspection" at the time 
it is 'loaded out" — and this practice enables the grain deal- 
ers to make a profit by mixing the grain in the elevators. 

The mixing of grain under conditions of fair inspection 
and grading is not wholly objectionable, for it benefits farmers 
and dealers alike by providing a market for the lower or "off 
grades" of grain. The cleaning and drying processes, more- 
over, may at times result in a real improvement of the mixed 
grain. It is objectionable, however, when under condi- 
tions of careless or unfair inspection and grading, exorbitant 
profits result. It is objectionable, also, when the low grades 
of wheat are unfairly scoured so that "the evidence of some 
of its imperfections, such as sprouts, mold and must, are 
removed or disguised and unsound wheat is made to appear 
better than it really is. The miller prefers to have the grain 
come to him in its natural state, so that he can more readily 
see the character of the wheat that he is buying." ^ The evils 

* ' * Wheat and Flour Prices from Farmer to Consumer, ' ' Bureau 
of Labor Statistics, p. 32. 


of unfair mixing are gradually diminishing as the state in- 
spection and grading at the primary markets is being im- 

Profits may also result from undue "dockage" in weight 
to cover impurities in the grain purchased from farmer or 
country dealer. Not only may the screenings resulting from 
cleaning in the terminal elevators be sold, but in the past there 
have been instances in which the weight of grain shipped out 
of a primary market was greater than that of the grain re- 
ceived. In the course of a decade, the grain shipments out of 
one of the western primary markets exceeded the receipts by 
over twenty-six million bushels. The evils of undue dockage 
have now been mainly prevented, for dockage at present is 
more strictly controlled by the state grain inspectors or the 
grain exchanges. 

There are many banks which readily accept terminal ele- 
vator receipts accompanied by insurance policies or certificates 
as collateral for loans. The elevator concerns may, therefore, 
by storing grain which they own in their terminal elevators, 
obtain funds with which to purchase more grain and in that 
way increase their profits as grain dealers. To protect these 
profits against loss resulting from destruction by fire they 
insure the grain. To protect them against loss resulting from 
fluctuation in prices they "hedge" in the speculative market 
by selling future contracts to cover grain which they have on 
hand, and buying future contracts to cover grain which they 
have contracted to deliver but which they have not as yet 

The Purchase and Sale of Grain at the Primary 


Though some of the grain shipped to the primary markets 
is disposed of by private sale, the grain trade in these markets 
is largely conducted in accordance with the trading rules of 
the grain exchange. The grain consigned to the primary mar- 

* For discussion of hedging, see chap. viL 



kets for sale may be sold a number of times before it finally 
reaches the consumer. It is sold by the country elevator com- 
panies to the central elevator concerns and other grain job- 
bers or dealers, to exporters, or to consumers. All of the 
grain, except that sold by the country elevators to consumers, 
is again sold by the central elevator concerns, exporters and 
other grain dealers. Thereafter it may be repeatedly sold, for 
there are grain dealers and speculators who buy and sell 
whenever the market warrants, or seems to warrant a profit. 
The negotiable warehouse receipts of the terminal elevators, 
which represent actual grain or the delivery notices which 
specify warehouse receipts when properly indorsed may 
change hands many times before the grain is shipped out of 
the elevators. 

The Purchase of Grain from Cauntry Elevators. — The 
grain shipped to the primary markets by line elevator com- 
panies is mainly sold on the floor of the grain exchange by 
their own representatives. That shipped by independent, local 
dealers, by farmers' cooperative elevator companies, individual 
farmers or other local shippers is usually sold through centraL 
commissionmen who also do most of their selling on the ex- 
change. The commissionman receives a commission of so 
much per bushel, in the case of wheat, rye or barley 1 cent, 
and of corn or oats J cent, as determined by the grain ex- 
change. His chief services are the selling of the grain con- 
signed to him and the safeguarding of his customers in all 
matters incident thereto, such as inspection and grading, 
dockage, weighing, freight charges, switching, storage and in- 
surance. He also is a means of supplying country elevators 
with credit, for he commonly permits them to draw against 
him for as much as 90 per cent, of the value of the grain con- 
signed to him. The country dealers do this by attaching to 
the railroad bills of lading, drafts drawn on the commission- 
man, and depositing them in country banks. Sometimes, the 
commissionman also ^vances funds to' country elevator con- 
cerns upon an open account, without requiring the deposit of 
collateral. Having sold and delivered the grain consigned to 
him, the commissionman renders an Account of Sales to the 



















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country shipper, Form No. 14, indicating a typical account 
rendered for grain sold "on track." 

The grain shipped by the country elevators is sold by using 
any one of three kinds of grain contracts. (1) It may be sold 
on a "to arrive'^ contract, i. e., in accordance with the rules 
of the exchange it may be sold before it has actually arrived 
at the primary market. The country shipper obligates him- 
self to ship sufficient grain within fifteen days to fill the con- 
tract which was previously made. (2) It may be disposed of 
by an "on track" sale, upon its arrival in the primary market. 
In this case the grain is sold in carlots after it reaches the 
primary market, the cars being then switched to the terminal 
elevators or to other points within the switching limits of the 
market. (3) The country elevator concern may choose to 
store its grain in the public elevators of the primary market, 
with a view to obtaining a better price than rules at the time 
of its arrival. When the owner of the grain directs, it is sold 
"in store," delivery being made by indorsing to the purchaser 
the negotiable warehouse receipt which was issued when the 
grain was placed in the elevator. 

The grain arriving at the primary markets from the coun- 
try elevators is mainly sold to the terminal elevator companies, 
many of whom are grain dealers. It is also sold to millers, 
especially in markets where the milling industry is im- 
portant, to malsters and cereal food manufacturers, to central 
grain dealers who are not warehousemen, to exporters, and in 
case of flaxseed, to linseed oil manufacturers. 

The Sale of Grain Stored in Terminal Elevators. — The 
grain which is stored in the public elevators of the primary 
market becomes the basis of a continuous grain trade, con- 
ducted under the rules of the grain exchange. While the 
stored grain does not leave the elevator every time the ware- 
house receipt passes from one dealer to another, it is at some 
time sold to millers or other consumers, to seaboard grain 
dealers, or exporting companies located either at primary or 
seaboard markets. Terminal elevator concerns may also be- 
come exporters of grain, in which case they offer the grain for 
sale on foreign exchanges, or fill orders received from abroad- 



The methods of selling the grain which has left the hands 
of the country shippers and is stored in the terminal elevators 
at the primary markets are various. (1) It may be sold 
through brokers on the exchanges in the primary markets, 
upon payment of prescribed brokerage commission charges. 
Such sales may be made for immediate or future delivery, and 
they may be made by sample, by grade, or by sample and 

grade combined. 

(2) The grain stored in elevators in the primary markets 
may be sold on the seaboard exchanges. The terminal ele- 
vator companies have certain brokers representing them in the 
seaboard markets, the brokers being supplied with samples of 
the standard grade of wheat, corn and other grains which 
they are instructed to sell. The brokers in this way sell some 
of the grain placed at their disposal to millers who are repre- 
sented on the port exchanges, but more of it to eastern dis- 
tributing and exporting grain dealers. The dealers who dis- 
tribute grain throughout the East and who obtain most of 
their supply in this way, sell the grain mainly to millers and 
to local grain and feed concerns by means of salesmen and 
mailing cards. They usually sell the grain in transit and 
then reconsign the cars to the buyers from the railroad recon- 
signment points to which the carloads of grain had originally 

been shipped. 

The eastern grain exporters, who also obtain most of their 
supply from the terminal elevators of the primary markets, 
fill foreign orders or sell their grain through brokers on the 
exchanges of the leading British and Continental European 
grain markets. Having received notice of acceptance, they 
contract for ocean freight with steamship lines or chartered 
ocean carriers, and at the time of shipment they contract for 
marine insurance to protect the grain which they are export- 

(3) Grain which is exported directly from the primary 
markets by the terminal elevator concerns or by exporting 
companies is sold through brokers on the European exchanges 
in the same way that the grain exported by eastern dealers 
is sold. A primary market exporter may arrange on a com- 




mission basis to have a seaboard exporter insure and store his 
grain awaiting shipment, contract for ocean freight and 
marine insurance and otherwise see that the grain is properly 
forwarded.^ There are also regular forwarding agents at the 
ocean ports who, upon payment of a commission, will see that 
his grain is forwarded to destination, or he may have a 
salaried representative at the port through which he ordinarily 


(4) Some grain is also sold privately in the central mar- 

Factors Influencing Grain Prices 

Since the great volume of the available grain of the IJnited 
States is concentrated at the primary markets of the interior, 
the prices paid at those markets determine the prices paid at 
the thousands of country grain markets, at the seaboard mar- 
kets, or at any of the interior markets to which the grain is 
shipped for final consumption. 

The prices paid to the farmers at the local markets do not 
in every instance follow the primary market with minute pre- 
cision. They do not fluctuate as frequently during the course 
of a day as do the primary market prices; neither are the 
price margins which the local buyers allow themselves every- 
where identical. The country prices follow the primary mar- 
ket prices more closely, and the difference between them is 
narrower at local markets where several buyers compete than 
at non-competitive points. Usually, however, the country 
price is lower than the primary market price by the amount 
of the freight charges from the local to primary market, and 
a price margin of a given number of cents per bushel, which 
the country buyer deducts to cover elevator expenses and yield 

a profit.^ 

The direct influence of the growers ordinarily affects the 
price which they receive at particular local markets only in 

*S. Harris: ** Methods of Marketing the Grain Crop,'' The An- 
nals of the American Academy of Political and Social Science, Sept., 

1911, p. 57. 

' For price margins see chap, iii, pp. 39, 40, 41. 


■ \ ^ 

so far as they may depress the price margin which the local 
buyers deduct from the primary market price, by withholding 
their grain or by organizing a cooperative elevator. If a great 
number of growers systematically withheld their grain at 
many local markets, their action would affect the price level 
at the primary markets, but thus far most of the growers have 
not stored the bulk of their grain longer than three months 
after the harvesting season, and their cooperative companies 
have never been able to dictate primary market prices. The 
growers, however, exert an indirect influence upon the price 
paid at the primary markets, in that the cost of producing 
grain, the cost of hauling it to the country elevator, and their 
profits affect the supply of grain which in the long run 
is produced. Unless the primary market price is such as 
to permit the payment of a country price sufficiently high to 
yield a reasonable profit, the farmers will produce less grain, 
and the resulting decline in the supply will inevitably force 
up the entire level of grain prices. 

The prices paid at the seaboard and interior markets 
to which grain is shipped from the primary markets are also 
based principally upon the primary market prices. As the 
country prices are lower, so the seaboard prices are higher 
than the prices paid at the primary markets by the amount 
of the freight rates ^ to tidewater plus certain additional sums 
per bushel to cover handling expenses and the eastern grain 
dealer's trade profit. Thus when No. 2 red winter wheat, 
during March, 1914, sold at from 92J to 96| cents per bushel 
in store at Chicago it sold at from 105 to 106 per bushel 
f. 0. b. afloat at New York. The tidewater prices do not 
fluctuate with the primary market prices with exact precision, 
for seaboard markets also have elevators which may be filled 
with grain, and exchanges where prices may be temporarily 
manipulated. The seaboard markets being more closely de- 
pendent upon the export trade, moreover, are influenced by 
the prices paid on the leading European exchanges to a greater 
extent than are the primary markets of the interior. 

Primary market prices are determined largely by condi- 

^For freight rates, see p. 59. 



tions of supply and demand. When the supply of grain is 
relatively large the price level is low, and when the reverse 
condition prevails the price level is high. The price deter- 
mining supply is not the supply available at any particular 
primary market, not that available at all the primary mar- 
kets, nor even that of the whole United States, for the grain 
market is a world's market and the prices paid at the primary 
markets are influenced to some extent by the grain crops of 
the world. The term supply, moreover, includes different 
conceptions, all of which influence the price level. The actual 
supply is, of course, that portion of the crop which leaves the 
farmer and enters the grain trade. But prices are influenced 
during and after the harvesting seasons by the total produc- 
tion of grain ; after the harvesting seasons by the visible sup- 
ply — the amount of grain in elevators, warehouses, railroad 
cars, vessels and other places where it is available for trad- 
ing purposes; during the planting season by the acreage 
planted ; and during the growing season by the reported con- 
dition of the crops. Conditions of frost, drought, floods, 
rainfall, grain pests, the opening of new farming regions, the 
use of fertilizers, land values, the rotation of crops and the 
relative use of land for different varieties of grain, for live- 
stock, dairy farming or other purposes, and, until the enact- 
ment of the tariff act of October, 1913, the import duties on 
grain and flour, were considerations of supply. ^ 

The place where the various conditions of supply are con- 
sidered is on the great grain exchanges. Indeed, it may be 
said that grain prices are determined at the primary markets 
only partly in accordance with the actual supply of grain ex- 
isting at any particular time. They are determined largely in 
accordance with the judgment of the hundreds of buyers and 
sellers of grain trading on the grain exchanges, as to how 
large the yield of the coming crop will be. There is prac- 
tically always an element of the future in the determination 
of grain prices. 

It is also on the exchanges of the primary markets that 
the demand for grain takes concrete form. The price-deter- 
mining demand is, likewise, one that is nation-wide and 


world-wide, and it is affected by many considerations such as 
the condition of the money market, the state of business pros- 
perity, the growth of population, the shift of population from 
country to city, the import tariffs of foreign countries, con- 
ditions of war or peace, and the degree of competition or com- 
bination existing within and between the primary markets. 

There are other considerations besides supply and demand 
which influence primary market prices. The relative prices 
at the different markets are influenced to some extent by the 
cost of transporting the grain to the seaboard and to other in- 
terior and foreign markets. It is partly because of differences 
in the freight rates to the seaboard that when on July 3, 1914, 
No. 2 red winter wheat sold at SIJ to 82 cents per bushel in 
Chicago, the price in St. Louis was 77^ to 78J cents and in 
Kansas City 74 J. Prices are influenced also by conditions of 
quality, for they are regularly quoted in terms of varieties 
and grades. The marketing and carrying costs also influence 
the prices paid at the primary markets, i. e., the charges for 
storage, weighing, grading, inspection, etc. While individual 
dealers cannot obtain higher prices than their competitors 
because their marketing and carrying costs are higher, the 
prices paid in particular primary markets and in all the pri- 
mary markets combined must be sufficient to cover costs and 
yield a profit. Grain prices are also influenced by forces such 
as the volume of gold production, the extensive use of credit 
instruments, the conditions of the money market, and the 
state of business prosperity. These are forces which influence 
prices generally and are not peculiar to grain,^ except that the 
last-mentioned factor influences grain prices less than the 
prices of cotton, crude minerals and other industrial materials, 
or of most manufactured commodities. 

Grain prices are at times subject to manipulation on the 
exchanges, but so large is the volume of grain annually bought 
and sold, and so extensive is the competition between the pri- 
mary markets, that the effects of any artificial manipulation 
which is not in accord with fundamental conditions of supply 
and demand ca n only be temporary. In one sense all grain 

^See chap. xvii. 




prices are the products of manipulation because they are con- 
stantly being adjusted to the level which in the judgment of 
the grain trade is warranted by the future crop. Manipula- 
tion, in the narrower sense, however, has but temporary effects 
on the price of grain. The relation between speculation and 
grain prices is fully discussed in Chapter VII. 

All of the various price factors are, in their present and 
future aspects, considered on the grain exchanges. The com- 
bined judgment of the multitude of buyers and sellers who 
transact business on the exchanges determines the price of 
grain paid in the primary markets. 

The inspection and grading of grain, the relations between 
the speculative exchanges and the sale of grain, and the 
financing of grain crops and movements, since they are sub- 
jects which are not confined to the grain trade, are discussed 
in subsequent chapters. 


Chicago Board of Trade, Annual Report of the Trade and 

Commerce of Chicago, 1913 (1914). 
♦Coulter, J. L. Cooperation Among the Farmers (1911). 
Day, W. a. "Modem Grain Storage Centers," Cassier's Maga- 
zine (Nov., 1912), Vol. xlii, p. 379. 
*DoNDLiNGER, P. T. The Book of Wheat (1908). 
*DUNN, S. O. "Grain Handling in the United States," Railway 

Age Gazette (June 4 and 11, 1909). 
Edgar, W. C. Story of a Grain of Wheat (1904). 
♦Harris, S. "Methods of Marketing the Grain Crop," The 

Annals of the American Academy of Political and Social 

Science (Sept., 1911), pp. 36-57. 
*PowELL, G. H. Cooperation in Agriculture (1913), chap. 7. 
Smith, R. E. Wheat Fields and Markets of the World (1908). 
*Weld, L. D. H. Statistics of Cooperation Among Farmers in 

Minnesota, 1913, Minnesota Agricultural Experiment 

Station, Bulletin No. 146 (1914). 
Studies in the Marketing of Farm Products, University 

of Minnesota Studies in the Social Sciences, No. 4 (Feb. 

New York Mayor's Market Commission: Report (1913), Ap- 
pendix 12. 


New York Produce Exchange : Annual Report for 1913. 

^Annual Statistical Report for 1913. 

*State Board of Agriculture of Missouri: Annual Report for 
1913, pp. 112-127. 

United States Bureau of Corporations: Transportation by 
Water in the United States (1909), Part II, chaps. 6 
and 7. 

•United States Bureau of Crop Estimates (Department of Agri- 
culture) : The Agricultural Outlook (formerly The Crop 
Reporter) issued currently as Farmers' Bulletins. In 
May, 1915, title was changed to The Monthly Crop 

* ^Wagon Hauls for Farm Products, Farmers' Bulletin No. 

672 (April 23, 1915). 

United States Bureau of Foreign and Domestic Commerce: 
Statistical Abstract of the United States, 1913 (1914). 

*United States Bureau of Labor Statistics: Wheat and Flour 
Prices from Farmer to Consumer (1914), Bulletin No. 

*United States Bureau of Statistics (Department of Agricul- 
ture) : Cost of Hauling Crops from Farm to Shipping 
Points, BuUetin No. 49 (1907). 

* Grain Movements in the Great Lakes Region, Bulletin 

No. 81 (1910). 
-Marketing Grain and Livestock in the Pacific Coast 

Region, Bulletin No. 89 (1911). 
Methods and Routes for Exporting Farm Products, Bul- 
letin No. 29 (1904). 

♦ Oats Crop of the United States, 1866-1906, Bulletin No. 

68 (1907). 

♦ Wheat Crops of the United States, 1866-1906, Bulletin 

No. 57 (1907). 

United States Census Office: Thirteenth U. S. Census Report, 
Agriculture, 1910, Yol. 5 (1913). 

*United States Industrial Commission: Distribution and Mar- 
keting of Farm Products, Part 2 (1901). 

United States Monthly Consular and Trade Reports (Sept., 
1909), The Grain Trade of Germany (1909), pp. 144-7. 

*United States Monthly Summary of Commerce and Finance 
(December issue for years 1905-1911). 
See' also Bibliography on Grain Exchanges, pp. 162, 163. 

•References designated by * apply also to chap. iii. 






The local cotton trade affords a second example of how a 
farm product produced over wide areas by thousands of grow- 
ers is sold by the producers and begins its journey to its con- 
sumers. The cotton crop of the United States is produced 
by about 1,700,000 growers, ginned by 25,000 ginneries, stored 
at 2,600 public storage places, consumed by 2,100 consuming 
establishments, and is handled by many transportation con- 
cerns, local buyers, merchants, factors, exporting houses and 
brokers.^ The methods of purchasing the cotton crop from 
the growers, owing to differences in the nature of the com- 
modity, the weaker financial condition of many of the growers, 
the greater importance of the foreign market, the location of 
many cotton mills in some of the growing districts, and to 
trade custom, differ somewhat from those described in connec- 
tion with the grain trade. 

The Cotton-geowing Belt 

While the area of the cotton-growing region is smaller 
than that of various grain-producing districts, it has been 
gradually extended westward from the Carolina seaboards to 
western Texas and Oklahoma. It includes the region south of 
an irregular line drawn from southeastern Virginia through 
the western part of North Carolina, the southern part of Ten- 
nessee and Missouri, the northern part of Oklahoma and the 
southeastern part of New Mexico, a distance of 1,500 miles in 
length and 500 miles in width (See Map No. VI). Small 
quantities of cotton have also in recent years been grown on 

*U. S. Census: Cotton Production 1913, Bulletin No. 125, p. 64. 



the irrigated lands of Arizona and California. The total cot- 
ton acreage of the United States has in the past few years 
ranged from 34,250,000 to nearly 37,500,000 ^ acres. 

The total cotton crop as reported by the United States 
Census Office has in recent years ranged from a minimum of 
10,462,000 running bales in the season 1909-1910 to a maxi- 
mum of 16,109,000 in the season 1911-1912.2 In the latest 
crop season (1913-1914) for which details are now available, 
Texas produced over 28 per cent, of the total crop of the 
United States, Georgia 16 per cent., and the other important 
cotton-producing states in the relative order of their crops 
were Alabama, South Carolina, Mississippi, Arkansas, Okla- 
homa, North Carolina, Louisiana and Tennessee. The total 
crop of the season, including linters, aggregated 14,614,000 
running bales.^ 

Commercial and Geographical Classification.— The cotton 
belt and crop may be variously classified from the standpoint 
of geographical location and varieties of cotton produced. In 
the broadest sense the United States produces two general 
varieties of cotton: (1) sea-island cotton, the growth of which 
is confined to limited areas near the coast of South Carolina, 
Georgia, and Florida and to adjacent islands, and (2) upland 
cotton, which is grown throughout the remainder of the cot- 
ton belt. The former yields a fine, strong, silky staple or 
fiber from IJ to 2 J inches * in length. Having a fiber exceed- 
ing IJ inches average length, it is distinctly America's long 
staple cotton, and is used for the making of the finest grades 
of yarn, cloth and lace, for mercerizing, for mixing with silk, 
and for other purposes requiring a fine variety of cotton. 
Since the average crop of sea-island cotton is the equivalent of 
but 75,000 bales of 500 pounds each, 25,000 bales of which are 
ordinarily exported, American cotton mills have been obliged 
to use certain varieties of lon g-staple upland cotton for the 

' U. S. Bureau of Statistics (Dept. of Agriculture) : The Agri- 
cultural Outlook, May 22, 1914, p. 13. 

'Round bales counted as half -bales, U. S. Census BuUetin No 
116 (1912), p. 24. 

» U. S. Census Bulletin No. 125, p. 9. 

*U. 8. Tariff Board, Cotton Manufactures vol. i, p. 26. 










• © 


























same purposes, and also to import long-staple cotton from 
Egypt. Upland cotton comprises over 99 per cent, of the 
entire cotton crop of the United States. Its staple is on the 
whole somewhat coarser and its length varies from | to 1^ 

Botanically there are a great many varieties of upland 
cotton, varying in productiveness, time of maturity, size of 
boll, length, strength, fineness and color of staple, ability to 
resist wind and rainstorms, appearance of the plant, and in 
other respects. The United States Department of Agriculture 
has classed the different varieties of upland cotton into eight 
groups or divisions— big-boll, long-staple cluster, semicluster, 
early or short limb, Peterkin or Rio Grande, and intermediate 
types — and under each group there are many varieties.^ 

Commercially, all varieties of American upland cotton are 
bought and sold, on the great speculative exchanges, as "up- 
land" cotton. In the spot markets of the South, however, and 
among cotton merchants and spinners, upland cotton is vari- 
ously subdivided into additional classes or types : 

(1) Thus in the narrower sense "Atlantic upland" cotton 
is produced in the eastern cotton states,— North and South 
Carolina, Georgia, Florida, Virginia, and parts of Alabama 
and Tennessee. It is the "short staple" cotton of the United 
States, its floss varying from | to 1 inch in length. (2) 
"Gulf" or "Western" cotton is grown in the basin of the Mis- 
sissippi River and in the Gulf cotton states. (3) "Texas" cot- 
ton is produced in Texas and Oklahoma. Both Gulf and 
Texas cottons, which are frequently grown in the same 
regions, have a staple of from 1 to 1^\— usually l^V inches— 
in length. (4) Certain medium long-staple cottons most of 
which are known as "benders," "rivers," "peelers," "creeks," 
or "quarter" cottons are grown in the bends of, or near the, 
Mississippi, Arkansas, White and Red rivers in Mississippi, 
Louisiana and Arkansas, mainly on a strip of land about 75 
miles wide and 200 miles long locally known as the Mississippi 
Deltas. The l ength of the staple of these cottons varies from 

* See * * Varieties of American Upland Cotton, ' ' Bureau of Plant . 
Industry, Bulletin No. 163. 



lyVto li inches and averages about IJ inches.* Small quanti- 
ties of long-staple upland cotton are also produced in various 
counties of Tennessee, Texas, Georgia and the Carolinas. It 
is estimated that in 1914 the total crop of long-staple cotton, 
other than sea-island, somewhat exceeded 400,000 bales of lyV 
inch cotton or 1,000,000 bales of IJ inch cotton.^ There are 
no sharply defined geographical limits within which the vari- 
ous types of upland cotton are grown. It is for this reason 
that the various cotton regions are not sharply defined in the 
accompanying map (No. VI). Ordinarily about 50 per cent, 
of the upland cotton consists of "Atlantic upland," 45 per 
cent. "Gulf and "Texas/' and 5 per cent, of long-staple varie- 
ties or types.^ 

In addition to sea-island and the various types of upland 
cotton, from three to six hundred thousand bales of so-called 
"linters" are annually marketed. Linters is the short fiber 
obtained by reginning cottonseed before the oil is extracted in 
the cottonseed oil mills. It is used in upholstering, in manu- 
facturing mattresses, comforts, batting, felts, cushions, wad- 
ding, pads, absorbent cotton, guncotton, niter powder and 
writing paper, and when mixed with shoddy it is used in 
making low-grade yarns, wrapping twine, rope, and lamp- and 


World's Production of Cotton. — The cotton belt of the 
United States produces over 60 per cent, of the world's cotton 
crop available for mill consumption. The cotton grown in 
India and China, two of the heaviest foreign producing coun- 
tries, consists mostly of coarse short-staple varieties. That of 

»U. S. Census Bulletin No. 116, p. 18; U. S. Bureau of Plant 
Industry, Bulletin No. 163, p. 33; A. E. Marsh: ** Cotton Exchanges 
and Their Economic Functions," The Annals of the American Acad- 
emy of Political and Social Science, Sept., 1911, p. 265; U. S. Bureau 
of Plant Industry: Farmers' Bulletin No. 591, p. 16. 

*U. S. Bureau of Crop Estimates: The Agricultural OutlooTc, 
Feb. 6, 1915, Farmers' Bulletin No. 651, p. 13. 

■A. K. Marsh: ** Cotton Exchanges and Their Economic Func- 
tions," The Annals of the American Academy of Political and Social 
Science, Sept., 1911, p. 265. 

** 'Supply and Distribution of Cotton" (1913), U. S. Census Bul- 
letin No. 117, p. 14. 



Egypt is of excellent quality, but scarcely begins to satisfy the 
demand of the world's cotton mills for high-grade long-staple 
cotton. The remainder of the world's crop available for mill 
consumption is widely scattered from Eussia, Turkey and 
Persia, to Mexico, South American countries, the West Indies 
and colonial Africa. The close dependence of British and 
European cotton mills upon the American crop has caused 
various British, German, French, Belgian, Dutch, Portuguese, 
Spanish and Italian associations and organizations to promote 
the culture of cotton in the colonies of their respective coun- 
tries and elsewhere. The annual crop of colonial cotton has, 
indeed, grown from 63,473 bales in 1905 to 102,890 in 1912.^ 
The relative importance of the American cotton crop, however, 
may not be measured solely by its volume; the poor quality 
of the cotton grown in some of the principal foreign cotton- 
producing countries still obliges the manufacturers of the finer 


World's Production of Cotton for Mill Consumption* 
(Jn hales of 500 pounds net weight) 






Per Cent, 
of Total 

United States 






























































* U. S. Census Bulletin.^No. 125, p. 57. 

* Bureau of Statistics (Department of Agriculture): The Agri- 
cultural Outloolc, Mar. 18, 1914, p. 42. 




grades of yarn and cloth in Europe to import the bulk of 
their supply from the American cotton belt. 

The Tx)cal Handling and Shipment of Cotton by • 


Ginning and Baling. — Ordinarily the first step in the 
marketing of cotton is to haul it from the farms to the 
gin. Growers who have obtained advances from local mer- 
chants or other persons, with the growing cotton as security, 
are sometimes required to haul the picked cotton, before it is 
ginned, to the scales of these merchants to have it weighed, 
and obtain credit at the market value. In any event, how- 
ever, the "seed-cotton"— cotton with lint attached to seeds- 
is taken to some one of the 25,000 ginneries to have the 
seeds removed and the lint baled. Usually about two- 
thirds of the weight of seed-cotton comprises seed and one- 
third lint. Eli Whitney, by the invention of the cotton gin 
and subsequent inventors by its improvement, made pos- 
sible the development of the cotton industry to its present 
vast proportions, for the gin has completely displaced the old 
hand method of separating the seed from the lint. Gmnmg 
has undergone great changes and improvements since the con- 
struction, in 1793, of the first gin suitable for upland cotton. 
Mechanically, the gin has developed from the hand gin, which 
daily ginned half a modern bale per man, to the old planta- 
tion gin which increased the quantity to several bales, and 
then to the centralized high-power gin which commonly gins 
and bales from 50 to 75 bales daily and in some cases as much 
as 250 bales in a day.^ Two main types of gin are in use at 
present : the roller gin and the saw gin. The former, which 
was in use long before the Whitney saw gin was invented, is 
used for ginning sea-island cotton, the seeds of which are loose 
in the lint. The latter is used to gin upland cotton, the seeds 
of which are removed only with difficulty. It consists of a 
series of saws attached to revolving cylinders, which draw the 
lint through the openings or slits of steel plates. 

»C. W. Burkett and C. H. Poe: Cotton, p. 221. 



The management of the gins has also undergone changes. 
The original hand gins were operated on the farms, and when 
power gins came into use each large plantation continued to 
operate its own plant. The cost of purchasing, operating, 
and repairing power gins which were used but a small part 
of the season, proved to be too expensive for the smaller farms 
into which most of the large plantations were broken, and the 
plantation gins were largely displaced by high-power central 
ginneries. Most of the growers now take their seed-cotton 
to large well-equipped stationary ginneries and pay the opera- 
tors for their ginning and baling services. Some of the large 
plantations, however, which are owned by individuals, cor- 
porations or syndicates are equipped with power gins of their 

The large ginneries are frequently unable to gin and bale 
all the cotton immediately after it is received by them. They 
therefore issue "gin tickets" against the production of which 
they will eventually deliver the baled cotton. These tickets 
are frequently accepted by local banks as the basis for the 
advance of funds to cotton buyers.^ 

The ginneries pack the lint cotton into loose rough bales. 
The usual "square" gin bale of upland cotton known as the 
"flat" or "plantation" bale has dimensions of about 54 by 27 
by 36 inches and a gross weight of about 500 pounds. Some 
upland cotton is also baled into "round" bales which are about 
3 feet long, 20 inches in diameter, and weigh about 250 
pounds. In the season of 1912-1913, round bales of upland 
cotton which are commonly counted as half -bales, comprised 
but 81,528 as compared with 13,373,998 square bales. Sea- 
island cotton is usually packed into bales 80 inches long, hav- 
ing a diameter of 32 inches and weighing about 390 pounds.* 
The average gross weight of square upland cotton bales in the 
season 1912-13 was 508.7 pounds, round bales 253.9, and 
sea-island bales 381.9. Broadly speaking the standard Ameri- 

*J. J. Arnold: ** Financing of Cotton,'' The Annals of the 
American Academy of Political and Social Science, Sept., 1911, 
p. 283. 

* U. 3. Census BuUetin No. 95, p. 52. 




can bale weighs 500 pounds and is generally so regarded in 
domestic markets. On the settlement of contracts in the 
foreign trade, however, "the standard for cotton from Texas 
and Arkansas is usually fixed at 530 pounds her bale, that 
for all other Gulf cotton, including Alabama and Oklahoma, 
at 510 pounds, while that from other sections is fixed at 500 

pounds." ^ 

At a small percentage of the gins, the baled cotton is com- 
pletely covered with bagging, but usually a space on each side 
of the bale remains exposed, for before the bale is shipped 
to its final destination it is recompressed into a smaller, more 
compact bale. The amount of tare— bagging and iron bands 
—used at the ginneries varies from 19 to 24 pounds, or from 
3.8 to 4.8 per cent, of the gross weight of a 500-pound bale. 
Local Storage and Hauling.— The seed-cotton is hauled to 
the gins by the growers in open wagons. After being baled 
it may be sold at the gin, it may be stored, it may be con- 
signed to a factor for sale at some larger cotton market and 
shipped to him by rail or water, it may be hauled directly to 
a nearby cotton mill, it may be taken to a local railroad station 
or steamboat landing for sale, or it may be taken back to the 
farm. The bales are often subjected to rough and careless 
handling. At the railroad stations and markets they are some- 
times piled on open platforms or even on the ground, and 
when taken back to the farms they are sometimes left out in 
the open, unprotected from rain or farm animals. One source 
of great waste in the cotton trade is gradually being elimi- 
nated by the construction of a greater number of protected 
storage places. When cotton is stored in recognized ware- 
houses, whether by growers or buyers, warehouse receipts are 
issued. Such receipts are used by some growers to obtain 
loans from banks in order to avoid the sale of their cotton 
at low prices, and by cotton buyers to obtain funds for the 
financing of their transactions. 

At some time or other most of the cotton is hauled to local 
shipping points. The hauling is done mainly by the growers, 
although in exceptio nal instances it is done by hired freighters. 
*U. S. Bureau of Corporations: Cotton Tare, p. 4. 




Cotton being a more valuable commodity than grain, it may be 
hauled in smaller loads and the hauling cost is of relatively 
smaller moment. In 1906 the Department of Agriculture 
stated that for the United States as a whole the average cost 
of hauling cotton from farms to shipping points was about 
80 cents per bale, and the average load a fraction more than 
three bales.^ The average cost per hundred pounds m that 
year ranged from 9 to 23 cents in the various cotton-growmg 
states, and the average distance to shipping points from 7.9 
to 15 miles. In 1915 the average load was reported to be three 
bales and the average distance to market somewhat less than 
it had been nine years earlier.^ 

Sale op Cotton by the Grower 

Cotton may be sold either after it is ginned or as seed- 
cotton. The former practice prevails almost universally in 
the United States, for the sale of "cotton in the seed is a sort 
of game of chance based on the law of averages." "The prac- 
tice of selling cotton in the seed is confined almost exclusively 
to the western end of the cotton belt. The better class of buy- 
ers base their calculations of lint percentages in making their 
offers for cotton on the comparative yield from day to day of 
lint to seed in their own gin or the one which they patronize. 
As a result the farmer who grows a better variety yieldicg a 
higher percentage of lint gets only the average price, and the 
one who grows a 'sorry' variety will in most cases receive 
some of the benefits that belong to his more progressive .eigh- 

There are various methods by which the growers sell their 
cotton crop, for they are affected by the financial condition of 
the growers, the existence of different kinds of buyers, the 
number of available storage houses, the amount of cooperation 
among the growers, the prevaili ng price, the ease or difficulty 

*U. S. Bureau of Statistics, Bulletin No. 49, p. 21. 

'Bureau of Crop Estimates, Farmers' Bulletin No. 672, p. 12. 

»U S Department of Agriculture Year Book (1912), p. 453. 





of reaching the large cotton markets or the cotton mills of the 
South, the prevailing custom, the intelligence of the growers 
and by other considerations. During the slave days the cotton 
grown on large plantations was usually consigned directly to 
the cotton factors or commissionmen located at the large sea- 
ports such as Charleston, Savannah, and New Orleans, the 
grower paying a commission for the sale of his cotton and 
also handling and shipping costs such as cartage, freight, 
storage, insurance, weighing, compressing and repairing bag- 

This method continued for a time after the Civil War, 
but with the break-up of most of the plantations into smaller 
farms, many of the small landowners and tenants had insuf- 
ficient marketing knowledge or were unable to assume the 
responsibility of consigning their cotton to distant factors. 
The old method, although it did not disappear entirely, was 
largely displaced by a system of numerous middlemen. The 
small growers frequently sold their crop to a local merchant 
at the county seat or other local town, and the cotton then 
passed successively through the hands of a commissionman 
at the state capital, a dealer at the seaport and a New York 
exporting concern.^ 

At the present time the farmers sell their cotton in differ- 
ent ways, and, as will be seen in the following chapter, the 
local buyers in turn dispose of their purchases variously. 

1. Sale to Local Merchants.— In parts of the eastern 
cotton belt — in the states of the South Atlantic seaboard where 
68.7 per cent, of the farms in 1910 comprised less than fifty 
acres and where some of the growers are financially weak — a 
portion of the cotton crop is still sold to local merchants, 
bankers or landlords or through them as commissionmen. The 
system is a remnant of the conditions which followed the 
break-up of the large plantations. The weak financial condi- 
tion of some of the small landowners and especially the small 
tenants, not only obliges or induces them to sell their cotton 
immediately after it is harvested, but it causes them to pledge 
the growing crop with local merchants for an advance of 

*C. W. Burkett and C. H. Poe: Cotton, p. 72. " 



needed implements, supplies, livestock or funds. The loans 
are usually obtained from local merchants, but sometimes 
from local bankers, or in the case of tenants, from landlords. 
The tenants of large landowning corporations or syndicates 
sometimes obtain advances from general merchandise stores 
which are operated by those concerns. In any case, the 
growers who obtain the advances, which may amount to 30 
or 40 per cent, of the estimated value of their cotton crops, 
must settle with the merchant, banker or landlord when their 
cotton is sold. They may sell the cotton to the merchants 
who in many cases are cotton buyers, or 'they may sell it 
through them on a commission basis, but they receive merely 
the balance due after the merchant's loans are repaid. 

This method is necessarily an expensive one. The growers 
are obliged to pay interest on the loans which they obtain, 
and since the merchants in turn frequently borrow from banks, 
the interest charges paid by the growers are usually high. If 
they sell to the local merchants a dealer's profit is deducted 
from the price which they receive. If they sell through 
them they are obliged to pay a commission of about $1.00 per 
bale. If they store the cotton with the merchant they are 
obliged to pay a storage charge of 50 cents a bale. The sys- 
tem, moreover, induces them to sell their crop as soon as 
possible, i. e., during the harvesting season when prices are 
frequently at their lowest level. The method is gradually 
declining in importance, for the growers are becoming finan- 
cially stronger, other buyers are appearing at the local mar- 
kets, and the cooperative farmers' unions are in some instances 
providing other means for obtaining loans and for storing 
cotton in warehouses. 

2. Sale to Exporting Houses and Cotton Brokers. 
—The practice which prevails the most widely throughout 
4he Gulf states, Texas and Oklahoma, but which is also be- 
coming common in the eastern cotton belt, is the direct sale 
by the grower to the agents of large exporting houses and 
other cotton-buying firms or brokers who ship the cotton 
abroad or to the northern mills. The large exporting houses 
have their main offices at New York or New Orleans, and 



branch offices at some of the principal cotton-trading centers 
such as Galveston, Memphis, Atlanta, Savannah, and Houston, 
and if the main office is in New York, they also have a branch 
office at New Orleans. Growers in the immediate vicinity of 
these cities sell their crop at these branch offices, but the 
usual practice is to sell it to local agents who are sent through- 
out the cotton-growing districts. The large exporting con- 
cerns have local representatives at the larger interior towns 
or interior points of concentration who buy cotton directly 
from the growers who haul it there. The trading at some of 
the larger interior markets is done in accordance with the rules 
of local cotton exchanges. Since much cotton is sold at these 
points by local merchants and commissionmen as well as di- 
rectly by farmers, and as they perform various other functions, 
they will be more fully described in the following chapter. The 
large exporting houses also send traveling buyers to many 
local markets to purchase cotton directly from the growers at 
the gins, the railroad stations, steamboat landings, local ware- 
houses and cotton yards, or at growers' premises. Some of 
them have more than one hundred local representatives and 
traveling buyers to purchase from the growers and local deal- 
ers all the cotton they are able to obtain at current prices. 

The smaller cotton-buying firms or brokers also purchase 
much cotton directly from the farmers through local buying 
agents, but they do most of their buying only after they have 
obtained orders from the spinners or their representatives. 
Having booked the cotton for future delivery they instruct 
their buyers to purchase the required quantity at prices suffi- 
ciently low to yield a trade profit. 

3. Sale to Southem Mills.— Since 1903 the mills lo- 
cated in the cotton-growing states have consumed more Ameri- 
can cotton than the mills located in the New England and 
other northern states. During the year ending August 31, 
1914, the total cotton consumption of the southern mills, in- 
cluding imported cotton, amounted to 3,023,415 running bales 
(counting round bales as half -bales) while those of all other 
states amounted to 2,861,318 bales.^ The taking s of American 

* As reported by U. S. Census, in Bulletin No. 128, p. 8. 



cotton in the southern and northern mills were respectively 
3,037,308 and 2,513,622 bales.^ In parts of North and South 
Carolina, Georgia and Alabama where most of the southern 
mills are located and to a smaller extent in Tennessee, Missis- 
sippi, Texas and Virginia, some growers sell their cotton 
directly to the spinners. The southern spinners obtain 
much of their supply from growers and local merchants who 
sell directly at the mills, and some of them also send buyers 
through the districts which grow cotton suited to their par- 
ticular needs.^ The sale of cotton by growers to local mills is 
the most direct method of selling cotton in existence and or- 
dinarily yields to the growers the highest profits. The south- 
ern mills, being in competition with buyers who ship cotton 
abroad or to northern mills, are obliged to pay such prices as 
market conditions warrant. The sales being direct, all selling 
costs are in some cases avoided ; in others there is a weighing 
charge of from 10 to 25 cents per bale, but at most the mar- 
keting costs do not exceed 50 cents per bale. 

4. Consigfninent to Cotton Factors. — Some growers, in- 
stead of selling their cotton to local buyers, consign it to com- 
missionmen or factors at the larger interior points of concen- 
tration or at the ports. The factors who handle cotton for 
growers, local merchants and others may sell the consignments 
immediately, and charge a commission of say one dollar per 
bale for their services. They may also insure the cotton, place 
it in storage, and make an advance of from 60 to 75 per cent, 
of its market value to the owner. At times they make advances 
to farmers with the growing crop as security. A part of the 
funds used to make advances is obtained from banks which 
accept storage receipts as security for loans.^ Since most of 
the growers sell their crop at the local markets, the central 
commissionmen handle less cotton for growers than for mer- 
chants and other local buyers. 

* As reported by the Secretary of New Orleans Cotton Exchange 
in Annual Eeport for 1913-1914. 

'M. T. Copeland: The Cotton Manufacturing Industry of the 
United States, p. 183. 

•J. J. Arnold: ''Financing of Cotton," The Annals of the 
American Academy of Political and Social Science, Sept., 1911, p. 282. 







5. Sale to Foreign Buyers. — ^While the bulk of the cot- 
ton shipped abroad is sold and shipped to foreign buyers by 
American cotton exporters, some Liverpool and Manchester 
cotton houses send buyers to the United States.^ These buy- 
ers, however, make their purchases mainly at the large interior 
and port markets, and consequently purchase relatively little 
cotton directly from the growers. 

6. The Cotton-growers' Unions. — Some cotton has in 
recent years been sold at cooperative farmers' warehouses by 
the farmers themselves or by the warehouse company upon 
payment of a fee or commission of say 50 cents per bale.^ 
Some of the cooperative warehouses classify and grade, sample, 
weigh, and after grouping it into lots of 50 or more bales, sell 
cotton for the growers. The activities of the growers' unions 
have, however, been wider than the sale of cotton for their 
members, the actual sales through union salesmen comprising 
but a small part of the cotton crop. 

The cotton growers have cooperated chiefly through the 
Farmers' Educational and Cooperative Union of America or 
^'Farmers' Union" which was organized in 1902, and the 
Southern Cotton Association which was organized in 1900 but 
which is no longer active.^ Other associations and conventions 
such as the Alliance and the Grange have also been formed 
at various times, but the Farmers' Union which claims a 
membership of three million, is the principal active coopera- 
tive organization in the cotton trade. It consists of a na- 
tional body, various state organizations or "divisions," many 
county organizations, and a still larger number of ^%cal 
unions." Its membership includes fruit growers, grain grow- 
ers and other farmers, teachers, ministers and physicians, as 
well as cotton growers, but the organization is strongest in the 
cotton states, particularly in Texas, Oklahoma, Arkansas, 
Georgia, Mississippi and Louisiana. 

Cooperation was undertaken by the cotton growers as the 
result of a long period of low prices. The Bureau of Crop 

^Copeland: p. 354. 

* Bureau of Corporations: Cotton Exchanges, Part V, p. 353. 

'Ibid., p. 321; G. H. Powell: Cooperation in Agriculture, p. 185. 

Estimates has estimated that the average cost of producing a 
pound of cotton exceeds 8 cents,^ yet from 1890 to 1904-1905 
the average price at New Orleans with the exception of two 
seasons was less than 9 cents a pound, and during some sea- 
sons went below five and six cents. The movement became 
especially active in 1904-1905 when the average price at New 
Orleans, after rising to 12.2 cents in the previous year, again 
fell to 8.7 cents, but it received a set-back in 1907-1908 when 
the financial panic together with other conditions made impos- 
sible the Union's demand for a grower's price of 15 cents. 

The cooperative farmers' unions have been active in vari- 
ous ways. They have endeavored to restrict production by 
reducing cotton acreage. Their general policy in this regard 
has been to encourage the farmers to grow less cotton and 
more corn or other diversified crops, but they have also at 
times advised members to plow up cotton fields which were 
already planted. The Southern Cotton Association was espe- 
cially active in discouraging cotton production in 1905-1906^ 
and the agitation appears to have been temporarily effective, 
for the acreage harvested during that season fell to slightly 
over 26,000,000 acres, from 30,000,000 in the previous season. 
Since then the cotton acreage has risen to over 37,000,000 
acres and it is impossible to judge the full effect of later efforts 
to restrict the production of cotton. 

The cooperative unions attempted to maintain cotton prices 
by recommending minimum prices for the crop, varying from 
10 to 15 cents a pound. To enable the members to hold their 
crop until the recommended prices are paid they have estab- 
lished some 1,600 warehouses. These warehouses, which are 
mostly of small capacity, are usually operated by separately 
organized companies or associations. They store the cotton 
for members, obtain loans for them through regular banking 
channels at favorable rates of interest with the stored cotton 
as security, and as formerly stated classify and grade, weigh, 
sample and sell the cotton when instructed to do so. The 
actual effect of the price-fixin g and warehouse policy cannot 

-' - * Estimates for years 1909 4uid 1910, Farmers' Bulletin No. 641, 
p. 14. 




be accurately judged, for cotton prices are influenced by many 
varying conditions. The growers have not received the prices 
urged by the unions and the warehouses have handled but a 
small share of the total cotton crop. Efforts have recently 
been made to consolidate the local warehouses into central 
companies, with central agents to act for them in marketing 

* %he producers' unions have also endeavored to restrict 
production by discouraging the use of commercial fertilizers 
. Some of them, however, have organized companies to operate 
fertilizer plants. The "Farmers' Union" has formed corpora- 
tions or associations to operate gins, to purchase supplies own 
newspapers and engage in other business enterprises. It has 
urged a legislative program which it regards as beneficial to 
thf farming population, and it is also a secret orgamzation 
which acts in a fraternal, educational and social capacity. 

The Deteemination of the Gbowees' Prices 

As in the case of country grain prices, the prices received 
by the growers of cotton are based primarily upon the prices 
prevailing at the large central markets which reflect the ca- 
bined judgment of the buyers and sellers of the world Cotton 
producers' prices, however, are more complex than those paid 
rlin growers. The latter are based directly upon the price 
at which grain is sold at the large primary markets, the gram 
buyers knowing that the relation between spot prices and the 
prices of future contracts on the grain exchanges is usual 7 
sufficiently definite to enable them to readily hedge should 
they desire to do so. Many cotton buyers also desire to pro- 
tect themselves against losses resulting from Anctuations in 
cotton prices by hedging in the speculative cotton markets 
i e when buying cotton they wish to sell an equal quantity 
of futoe contracts and when contracting to deliver cotton 
which they have not as yet purchased they wish to purchase 
In equal quantity of future contracts.^ The c otton^xchanges 
* See chap, vii, p. 156. 




at which this hedging is done are mainly those at New York, 
New Orleans and Liverpool. Future and spot cotton prices, 
however, have not in the past borne the definite relationship 
to each other — they have not maintained the substantially ex- 
act parity which is maintained in the grain trade. Owing 
largely to the right to deliver many different grades of cotton 
on a future contract which is made out in terms of middling 
cotton and the failure to establish the "differences" between 
the various deliverable grades with exactness, cotton futures 
have frequently sold at an abnormal discount as compared 
with the prices paid for spot cotton at the large spot markets. 
Since many cotton buyers consider hedging essential to the 
economical handling of the cotton crop and cotton "futures" 
are necessary in order to hedge, the failure to maintain a 
parity between the prices of spot cotton at the large cotton 
markets and the price of futures has obliged such cotton 
buyers to base the country price primarily upon the price of 
future contracts. 

The following statement by the United States Bureau of 
Corporations indicates the extent to which producers' prices 
are based upon future contract prices : 

A matter of great importance to the current discussion is 
that these interior buyers very generally base their bids on the 
future quotations of some cotton exchange. That is to say, 
in arriving at the prices which they will pay producers they 
constantly consult the future market and add to or deduct a 
certain number of points, technically known as "limits," ac- 
cording to the state of the market, the grade of the cotton, or 
other circumstances. In the case of a merchant having buyers 
in the interior, the limits which are thus to be added to or 
deducted from the contract price are determined at the head 
office. They are sent to the field representatives to govern pur- 
chases from cotton producers and country merchants. These 
interior buyers, in case they do not have ready access to future 
quotations, are kept advised by the head office of any 
important changes in them and they use these future prices in 
connection vrith the limits furnished them in making their 

* Beport on Cotton Exchanges, Part IV, p. 50. 




Prior to the application of the ^^Cotton Futures Act" of 
August 18, 1914, the cotton buyers did their hedging on any 
one of the three great speculative exchanges, and they shifted 
their hedges from one to another, according to which market 
was best adapted at any particular time. They likewise based 
their buying prices upon the future prices of any one of these 
exchanges, for they knew what middling cotton was normally 
worth at any point in the cotton belt as compared with the 
prices at which futures were selling in New York, New Orleans 
or Liverpool. Knowing the correct price for middling cot- 
ton they could readily judge how much more or less should 
be paid for the higher and lower grades. Since the enactment 
of the above-mentioned act American concerns have been 
unable to hedge on the Liverpool or any other foreign exchange 
because of a prohibitive tax of two cents per pound. They 
have, however, continued to hedge on the New York and New 
Orleans exchanges although on a somewhat smaller scale than 
formerly; and foreign cotton-purchasing concerns have con- 
tinued to hedge on the Liverpool Exchange. 

The common practice of the large as well as of numerous 
small buying concerns is to instruct their interior buyers to 
purchase at a given number of "points" (hundredths of a cent) 
*^off" or *^on" the price at which future contracts are selling 
at some one of the speculative exchanges. Whether these so- 
called limits will be "off" or "on" will depend upon varying 
conditions such as the. month selected for hedging, the extent 
to which the futures are selling at a discount, whether the 
prices are paid for delivery at the interior market, at the port 
of shipment or at final destination and whether or not trans- 
portation and other costs are included in the limits. Instead 
of calculating a limit "on" or "off" the future price, a mer- 
chant, exporter or broker may compute a definite price as a 
guide for his buyers. In any event the price paid to the 
grower ordinarily is one that is based upon the future prices 
of one of the speculative exchanges minus freight, compress, 
purchasing and handling costs and an additional amount to 
cover any uninsured risks incident to the business and a 
dealer^s profit. 


In the United States cotton is commonly bought at gross 
weight — lint and tare — but in selling to a foreign buyer the 
American exporter is usually required to sell at net weight and 
at c. i. f. (cost, insurance and freight) prices. Having re- 
ceived an offer from Liverpool, the exporter in addition to the 
usual deductions makes an allowance of 6 per cent, of the gross 
weight of the cotton to cover tare, and deducts ocean freight 
and insurance. When a foreign cotton importer, for example, 
after examining the price of futures on the Liverpool Ex- 
change bids sixpence for cotton delivered in Liverpool on 
c. i. f. and 6 per cent, terms, the American exporter calculates 
his buying price by deducting from 12 cents (the equivalent of 
sixpence) the following amounts : 

Tare, 6 per cent, of 12 cents T2 points 

Inland freight and compressing, say 50 " 

Ocean freight, say 55 " 

Insurance, say 11 

Expense of doing business, say 12 " 

Profit, say 10 " 

Total 210 " 

Deducting 2.10 cents from 12 cents leaves 9.90 cents as the 
price at which he hopes to purchase the cotton from the 
farmer.^ This calculation contains a fixed profit of 50 cents 
per bale (10 points) and in addition a hidden profit of 19 
points due to the deduction of 6 per cent. (72 points) for 
tare, although the bale purchased from the farmer contains 
only about 4.4 per cent (53 points) of tare. The hidden 
profit which is due to the differences in the tare rules ap- 
plicable in the United States and foreign countries is con- 
tingent, for competition may compel the exporter to share it 
with the grower by paying him more than 9.90 cents, and the 
foreign buyer may in case the actual tare is ascertained by 
physical test present a claim for over-tare. 

While the prices paid to the cotton growers are based 
primarily upon the future prices of the speculative exchanges, 

* Bureau of Corporations: Cotton Tare, p. 36. 



they are frequently affected by other considerations. There 
are numerous local buyers, especially some of the country mer- 
chants, who do not calculate their prices with the care that 
the larger exporters and brokers do; there are local spinners 
who do not need to deduct freight, compressing and other 
handling costs; and cotton may also be shipped to the large 
interior points of concentration or the ports on consignment 
and sold at the spot prices which are there paid. Competition 
between local buyers, therefore, and the ability of some 
growers to sell in the large spot markets, obliges the local 
buyers to modify their calculations whenever the future con- 
tracts sell at abnormal discounts as compared with the cotton 
prices of the large spot markets. An Oklahoma cotton firm, 
for example, which in 1906-1907 computed its buyers' limits 
with reference to the New York future market, gradually 
changed its limit from 60 points ^^off" on September 25, to 10 
points "off" on January 7; "even" on January 14; 10 points 
"on," on January 21; and 30 points "on" on February 11: 
because the New York futures were selling at an increasingly 
abnormal discount.^ The season of 1906-1907 is an extreme 
instance because the New York revision committee at that 
time fixed grossly erroneous differences between middling cot- 
ton and the other deliverable grades, but it illustrates how the 
cotton buyer cannot, except temporarily, disregard the prices 
paid in the large spot markets. 

It is to be understood, also, that in applying the limits 
based upon the price of cotton futures, the local buyers exer- 
cise their judgments as to the quality of any particular lot 
of cotton. Limits based upon middling cotton are modified 
in buying cotton of higher or lower grade, and different staple 
lengths, but there is much complaint that the growers of high- 
grade and long-staple cotton do not always obtain the relative 
prices to which they are entitled.^ They also take account of 
the amount of tare. Owing to the practice of buying cotton 
at gross weight growers sometimes believe that they are re- 

* Bureau of Corporations: Cotton Exchanges, Part IV, p. 58. 
"'The Relation of Cotton Buying to Cotton Growing,'' The 
Bureau of Plant Industry, Bulletin No. 60, p. 7. 



ceiving the price of cotton for the bagging and bands on the 
bale, but it is generally understood in the trade that this view 
is fallacious. In determining the price of cotton futures and 
spot cotton at the central markets full allowance is made 
for the customary amount of tare, and if a particular lot is 
over-tared the local buyers or spinners will adjust the price 
paid, make an allowance in the weight, or refuse to purchase 
the cotton. 


See references designated by an * appended to, pp. 
134, 135. 




Having described the local cotton market and the manner 
in which the growers dispose of their crops, it is now proposed 
to trace the cotton crop in its movement from the local buyers 
to the spinning mills of the world. As the growers sell their 
crops in different ways so the portion which is shipped out of 
the cotton belt is sold by merchants, exporters, brokers and 
factors in different ways, is shipped to widely varying markets, 
and moves over varying routes. 

Supply and Distkibution' 

The total annual supply of cotton in the United States 
shown in Table VII is the supply for the year ending August 
31, that is for a period extending from one cotton harvest to 
another. It is, therefore, in excess of the crop grown during 
the preceding season, for it is made up not only of current 
ginnings but also of cotton on hand at the beginning of the 
year, the imports of cotton from abroad, and the quantity of 
linters produced during the year. 

Cotton Exports. — Although the quantity retained for use 
in American mills is slowly advancing as compared with the 
shipments to foreign mills, the cotton industry is still de- 
pendent chiefly upon the export trade. During the years end- 
ing August 31, 1912, 1913 and 1914 (See Table VII) 59.7, 
54.2 and 54 per cent., respectively, of the total cotton supply 
and an equivalent of GG, 62 and 60 per cent, respectively of 
the total crop of the preceding season, was shipped abroad. 
Nearly four-fifths of the total cotton exports are shipped to 




the United Kingdom, Germany and France. For many years 
the first of these countries took the bulk of all the cotton ex- 
ported from the United States, and in the fiscal year 1914 ^ 


Supply and Distribution in Years Ending 
August 31, 1912, 1913 and 1914* 


Crop of previous season 

Total cotton supply of United 


Cotton expMDrted. 

Cotton consumed in United 

In cotton-growing states .... 

In other states 

Cotton destroyed by fire 

Cotton on hand at end of year . 

In mills of cotton-growing 
^ states 

In mills of other states 

In public storage places 

Elsewhere (estimated) 



















* As reported by U. S. Census Office in Bulletin No. 128, p. 8. 

the British proportion still comprised 37.6 per cent, of the 
total. The rapid rise of the cotton-manufacturing industries 
in other countries, since the later nineties, has, however, re- 
duced the relative preponderance of the British market. 
Nearly 30 per cent, of the total exports are now destined to 
Germany, 11 or 12 per cent, to France, and smaller quanti- 
ties to a wide range of foreign markets extending from Italy, 
Spain, Belgium, Austria-Hungary, the Netherlands, and Rus- 
sia in Europe, to Canada and Mexico in the Western hemis- 
phere, and Japan, China and India in the Orient. Owing 
largely to irregularities in the available supply of East Indian 
cotton, which is the chief source of supply for Japanese mills, 

* Returns of Bureau of Foreign and Domestic Commerce for Fis- 
cal Year Ending June 30tb. 








the exports to Japan have in recent years been subject to 
violent fluctuations. 

All but 16 or 17 per cent, of the cotton exports are shipped 
from the ports of the cotton-growing states. Galveston, alone, 
exports from 2,700,000 to 3,800,000 bales annually, and the 
three principal cotton ports — Galveston, New Orleans and 
Savannah — handle about 70 per cent, of all the cotton exports. 
The remainder is exported principally from New York, Wil- 
mington (North Carolina), Brunswick, Mobile, Charleston, 
Pensacola, San Francisco, Boston, Baltimore and Seattle. 

Shipments to Northern Mills.— Of the 5,300,000 to 5,800,- 
000 bales of cotton consumed by domestic mills in recent 
years {See Table VII), from 2,600,000 to 2,800,000 bales, or 
less than one-half, were consumed in the mills of New England 
and other northern states. As reported by the New Orleans 
Cotton Exchange, the shipment of American cotton to the 
northern mills comprised 2,488,000 bales in the year ending 
August 31, 1913, and 2,514,000 in 1914 or about 17 per cent, 
of the season's crop.* 

The shipments to northern mills are made over two general 
routes — "overland" and coastwise. From 44 to 47 per cent, 
of the total shipments in the crop years 1912-1913 and 1913- 
1914 were made over the former route, the railroad freight 
rates being so arranged that cotton can readily move direct 
to northern mill centers. Cotton moving northward by rail 
passes through the various so-called "northern gateways" such 
as St. Louis, Hannibal, Cairo, Louisville, Cincinnati, Eock 
Island, Parker and other cities lying mainly on the Ohio and 
Potomac rivers. The coastwise route, which for many years 
handled the bulk of the northern cotton shipments, still han- 
dles over one-half of them — 56 and 53 per cent, respectively 
in the years 1912-1913 and 1913-1914. Cotton is regularly 
shipped northward from each of the southern ports men- 
tioned in connection with the cotton export trade. 

Consumption by Southern Mills. — So rapid has been the 
rise of the cotton-manufacturing industry in the cotton-grow- 




* Secretary of New Orleans Cotton Exchange: Eeport of 1913- 

ing statles that they have in recent years consumed from 2,700,- 
000 to 3,000,000 bales, or more than the total mill consump- 
tion of the New England and other northern states {See 
Table VII). Their takings of American cotton during the 
years ending August 31, 1913 and 1914 aggregated 2,969,000 
and 3,037,000 bales respectively or about 20 per cent, of the 
previous season's crop.^ Southern mills consume but small 
quantities of foreign cotton because they require less high- 
grade, long-staple cotton, such as is imported from Egypt by 
the northern mills. The southern mills are especially im- 
portant as spinners of yarn, a part of which is woven in the 
South and the remainder of which is used in the northern 
textile industries. 

Direct Shipments 

About one-half of the cotton purchased from the growers 
at the many local cotton markets of the South is shipped 
directly from the local shipping points to the southern and 
northern mills or to the ports of shipment without first mov- 
ing through the large central markets of the interior. Much 
of the cotton shipped directly to the ports, moreover, has been 
billed to northern mills or foreign importing merchants from 
interior compress points on, through bills of lading, and 
merely passes through the ports in transit. This is particu- 
larly true when the cotton locally purchased is to be applied 
on a contract already booked. 

MnrTring and Tagging. — Before the cotton leaves the local 
shipping points the bales are tagged so that they will not lose 
their identity. Ordinarily lots of from twenty-five to one 
hundred bales are tagged with the same mark, such as "Hark," 
which they retain thereafter throughout their journey to the 
mills. While deliveries may be made on cotton contracts 
by grade as in the case of grain, the cotton after it leaves the 
, growers does not lose its identity as the ^ain which is stored 
in bulk usually does. 

* Secretary of New Orleans Cotton Exchange: Eeport of 1913- 


\ I 





Compressing Flat Bales.— Cotton shipped direct from local 
points to mills or ports must in many cases be unloaded 
en route in order that the "flat" gin bales may be "recom- 
pressed" into bales of about one-half their original thickness. 
The law as well as the carriers require this recompression at 
the first compress passed en route to port or other distaot des- 
tmation so as to facilitate shipment and economize railroad 
and steamship equipment. The compresses are usually owned 
and operated either by the railroads, by cotton-buying con- 
cerns, or special compress companies, but few gins as yet being 
equipped with compresses. Compression is so closely con- 
nected with the transportation service that it is regulated by 
the state railroad commissions and by the Interstate Commerce 

The cars containing the flat bales are usually switched in 
on one side of the compress and those receiving the com- 
pressed bales are placed on the other side. Meanwhile com- 
press receipts are issued, for during the busy season fifteen 
or more days may pass before the cotton is finally loaded out 
of the compress. These receipts, a copy of which is reproduced 
m Form No. 15, are accepted by bankers as security for loans, 
and when cotton is sold at the compress a transfer of the re- 
ceipts constitutes a delivery. In many cases the cotton is 
shipped to the compress on local bills of lading and at local 
rates, with the understanding that upon satisfactory presenta- 
tion of proof of reshipment the difference between the local 
rates and the relatively lower through rates will be refunded to 
the shippers. When the receipt is returned the compress super- 
intendent issues a "clearance" such as is shown in Form No. 
16, after which the compressed bales may be forwarded to 
destination. Upon delivery of the recompressed bales, the 
compress usually collects its fees of about 10 cents per 100 
pounds or 50 cents per bale directly from the railroad which 
either absorbs this charge in its freight rates or collects it 
from the shipper or consignee as a special charge. Compres- 
sion in transit resembles the milling-in-transit privilege men- 
tioned in connection with the grain trade. 

'See 29 I. C. C. Eep. 106; 30 I. C. C. Rep. 467, etc. 






Through Bills of Lading. — On shipments made direct 
from compress to destination the railroad issues through rail- 


u^o ..367 

Marit TexaSf' 

J 90 

3ales Cotton 

For Recount of- 



This receipt must be returned before clearance wiU be issued 



Form 15 

road or export (rail-ocean) bills of lading. The shipping con- 
cern concentrates these bills at some point where it maintains 
an office and negotiates a draft drawn upon the buyer or the 
reimbursing bank designated by the buyer. To the draft are 

Mart. Texas. 

Iteceived of- 


.Bales cotton to be pressed and delivered to the I. 4 Q, N. B. R. for sbipment 








Form 16 

attached the through bill of lading, an invoice, and, if it is 
an oversea shipment, a marine insurance certificate.^ 

Cotton Insurance. — Some of the larger growers take the 
precaution to insure their crop, but the smaller farmers sel- 

, ' See p. 312. ' 



dom insure their cotton until it is put into warehouses for 
storage. After the cotton has left the growers, however, it is 
regularly insured against loss by fire. Many merchants, ex- 
porters, brokers or factors carry policies which cover all the 
cotton purchased or handled by them, the insurance compa- 
nies being notified each night of the amount of the day's pur- 
chases and sales. Usually at the end of each month the com- 
pany presents a bill for premiums based upon the amount 
of cotton insured during the month. Cotton exported to 
oversea countries is, moreover, covered by a marine in- 
surance policy from the time that it reaches ship's side, 
the premium to be paid either by the seller or buyer ac- 
cording to whether the cotton is sold on c.i.f. or f.o.b. 

Interior Points op Concentration 

While about one-half of the cotton is shipped direct from 
local shipping or compress points to local mills, seaports or out- 
side destinations, the other half is concentrated at the cen- 
tral cotton markets of the interior, or so-called "interior points 
of concentration." As shown on Map No. VI in the preced- 
ing chapter there are thirty-five or more of these inland mar- 
kets the largest of which from the standpoint of cotton receipts 
are Houston, Texas; Memphis, Tennessee; St. Louis, Mis- 
souri ; Augusta and Atlanta, Georgia ; Cincinnati, Ohio ; Little 
Rock, Arkansas; Montgomery, Alabama; Columbia, South 
Carolina ; Selina, Alabama ; Shreveport, Louisiana ; Meridian, 
Mississippi; and Dallas, Texas. In the crop year 1911-1912 
the receipts at the twenty-eight principal interior towns to- 
taled 7,660,000 bales,^ or about 47 per cent, of the entire cot- 
ton crop. Among the interior markets are several of the 
"northern gateways," which are points of concentration as 
well as points through which overland shipments pass in 

* New York Cotton Exchange: Annual Report of the Cotton Crop 
(1911-1912), p. 17. 



( . 



Sources of Supply. — A part of the cotton received at the 
large interior markets is merely unloaded to be recompressed, 
but the bulk of it is shipped there by exporting houses and 
brokers for resale, and is consigned by local merchants and 
growers to the factors located at these points or is hauled 
there by growers from the surrounding community. The 
largest amount of concentration is done by the large exporting 
houses who do not limit their local purchases to orders on 
hand but buy all the cotton they are able to obtain at current 
prices. Whatever they can apply on contracts already booked 
they ship direct to destination, and the remainder they store 
in the large warehouses at the interior points of concentra- 

Functions. — The larger interior points are not only places 
at which cotton is held until it has been sold for shipment 
to spinners or foreign importers, but are central cotton mar- 
kets. They provide facilities for the storage, weighing, com- 
pressing, sampling, grading and inspection of cotton. They 
provide a market for the sale and resale of cotton, and it is 
there that cotton bales sold for shipment are '^patched" as in 
the case of those shipped direct to destination from local com- 
presses. At some of the largest interior markets, cotton ex- 
changes have been organized and rules have been laid down 
for the conduct of the spot cotton trade. The larger markets 
publish daily cotton prices which are viewed not only by 
the dealers at these markets, but by spinners and outside cot- 
ton merchants, by local buyers, and by the growers. While 
in the main these prices follow the prices at which future 
contracts sell in New York, New Orleans and Liverpool, they 
do not follow them when the futures sell at an abnormal 
discount. In this way the spot markets of the larger 
interior towns, together with those which are at the larger 
ports, sometimes affect the prices paid to the growers of 

Extent of Competition. — There is more competition be- 
tween these central cotton markets than there is between 
the primary grain markets, for they are more numerous, the 
districts from which they receive their supply are less definite, 




and the total supply of cotton is relatively smaller. There 
is, moreover, considerable competition within some of these 
markets, the range of buyers being wider than in the primary 
grain markets. 

Purchase of Cotton from Growers, Local Merchants and 
Factors. — On the important market days nearby growers fre- 
quently haul their cotton direct to the cotton yards of the in- 
terior points of concentration and sell it at current prices. 
Growers as well as country merchants located at a distance 
usually consign it to factors or commissionmen who may sell it 
immediately or store it in warehouses which are owned by the 
railroads, cotton buyers, warehouse companies, or in some cases 
by cooperative concerns. The factors usually obtain a com- 
mission of about 2J per cent, for buying or selling cotton. 
The selling at some of the central markets is done in accord- 
ance with rules laid down by the spot exchanges of which the 
various buyers are members, and, where no exchange has been 
organized, the trading is nevertheless conducted in accordance 
with trade custom. 

The cotton may be sold to the central market buyers in 
various ways: (1) Cotton in the yards or warehouses is sold 
on the "spot,'' i. e., samples are extracted from the bales and 
the sale is based on them. (2) It may be sold "to arrive" in 
which case the cotton is sold at the central market before it 
arrives there from the local shipping points. Such sales may 
be made on the basis of samples, by grade or "description" 
or by a combination of both sample and grade. The samples 
are sometimes guaranteed by the seller, but in any event if 
the cotton sold does not agree with the samples or grades 
provided by the seller, the buyer may insist upon a readjust- 
ment of terms or under certain conditions, as provided by 
the rules applicable in the various markets, refuse to receive 
the cotton when it arrives. (3) Cotton may also be sold on 
f. o. b. terms, for delivery either at the central market or at 
a designated port. In Houston, Texas, for example, cotton 
may be sold for delivery f. o. b. barge or railroad at Houston 
or ship at Galveston. When sold for delivery at a point be- 
yond the central market, the cotton is said to be sold "in 



transit." The f.o.b. sale differs from the usual "to arrive" 
sale in that the latter requires the delivery of the cotton on 
the spot at the central market, the seller paying all delivery 
costs, while the former sale is made at a price which includes 
delivery charges. On shipments from a local shipping point 
an f.o.b. sale requires the buyer to pay the railroad freight 
rate, compress fees, drayage and other delivery charges except 
such as may be otherwise agreed upon or provided for in the 
exchange rules. 

Cotton Receiving Ports 


Although the principal cotton-exporting ports have been 
mentioned in connection with the export trade, it should be 
noted that the export trade by no means portrays the volume 
of cotton handled at the various cotton-receiving ports. The 
coastwise as well as the cotton-export trade is handled at the 
ports. Some of their receipts come direct from local shipping 
or compress points, and others from the interior points of 
concentration. Some cotton passes through them in transit, 
some is placed in storage, some is handled on through bills 
of lading, some is rebilled at the ports, and some is used in 
local mills. 

They annually receive from 70 to 75 per cent, or more of 
the total cotton crop. Their net receipts — the amount of do- 
mestic cotton received which has not been transshipped from 
one port to another and already included in the receipts of 
the first receiving port — comprised 10,189,000 running bales 
in the crop year 1912-1913 and 10,539,000 in 1913-1914, 
or about 72 per cent, of the entire crop. The principal indi- 
vidual receiving ports are Galveston, New Orleans, Savan- 
nah, Norfolk and Newport News, Port Arthur and Texas 
City, Wilmington (North Carolina), Charleston, San Fran- 
cisco, Brunswick and Mobile. Certain of the northern 
ports, such as New York and Boston, from which appre- 
ciable quantities of cotton are yearly exported, receive but 
small quantities directly from the interior of the cotton 



Functions of Receiving Fort.— First of all the cotton-re- 
ceiving ports are shipping centers, and are therefore equipped 
with docks and wharves where the vessels of the world may 
obtain the cotton which is drayed or otherwise conveyed from 
the freight yards or from warehouses to the waterfront. They 
are also points of concentration, for cotton is shipped to ports 
as well as to the large interior towns to be held for final sale 
and shipment, and they are, therefore, equipped with ware- 
houses and cotton yards. They are cotton markets at which 
all such cotton as has not been sold for shipment in the in- 
terior may be bought and sold. Cotton hauled there by nearby 
farmers, or shipped from the interior by growers or interior 
buyers, is disposed of by methods similar to those prevailing 
at the central markets of the interior. Being markets and 
shipping centers they have rules and facilities for the weigh- 
ing, inspection and grading, sampling, patching, tare, and 
delivery of cotton bales. At some of them cotton exchanges 
have been organized so that the sale and handling of cotton 
may be conducted in a uniform and orderly manner. As in 
case of the large interior centers, the great exporting houses 
either have branch offices or buying representatives at the prin- 
cipal receiving ports. 

With one exception all the port as well as interior cotton 
exchanges constitute spot markets. Many of the dealers at 
these markets regularly hedge their cotton transactions, but 
they do so on the speculative exchanges of New York, New 
Orleans or Liverpool. It is to be noted, however, that one 
of the largest receiving ports — New Orleans — is equipped with 
an exchange where cotton futures as well as spot cotton are 
regularly bought and sold. 

Sale of Cotton to Domestic Mills 

Manner of Sale. — The northern cotton mills purchase their 
supply of cotton from the export houses, brokers or other cot- 
ton merchants who obtain it at the local markets, the interior 
points of concentration (including certain northern gateways) 



or at the receiving ports. These merchants usually have officer 
in the large northern cities and agents at numerous mill cen- 
ters; indeed the main offices of many of the largest cotton 
houses are in New York. The mill treasurers usually buy on 
the basis of samples which these agents submit for inspection 
although they sometimes purchase by grade or description. 
When the cotton arrives at the mills it is in many cases tested 
by experts, and if it is of lower grade than the sample the 
seller is required to make restitution to the mill.^ It is im- 
portant that the cotton merchants deliver as nearly as possible 
the exact quality of cotton purchased, because the mills are 
engaged in the manufacture of yarn, cloth or other textiles 
requiring particular grades of cotton. It is for this reason 
chiefly that the mills do not purchase their supply on the large 
speculative exchanges, where the grades do not fully account 
for length or fineness of fiber, and where the contracts permit 
the delivery of numerous grades. They use the speculative 
exchanges principally as a price barometer, and in some cases, 
for hedging purposes. The methods of purchase in the south- 
ern mill centers differ from those of the northern mills, only 
in that they buy directly from cotton growers as well as from 

Terms of Sale. — The terms of the contract which the north- 
ern inills enter into with the cotton merchants are various. 
They may contract for full delivery at a specified time, or in 
monthly instalments. The contract may, moreover, require 
delivery either on c.i.f. or f.o.b. terms. The former re- 
quires the merchant to deliver the cotton at the mill for the 
agreed price; while the latter, as in the case of shipments from 
local points in the South to the central cotton markets of the 
interior or the ports, requires him to deliver it free on board 
railroad car or vessel. The spinner, in case of an f.o.b. pur- 
chase is required to pay all railroad, steamship, compressing, 
insurance and other shipping charges, unless some of them are 
especially assumed by the merchant in the contract. At well- 

*M. T. Copeland: Cotton Manufacturing Industry of United 
States, p. 180. 

*See chap, v, p. 106. 




organized markets, f.o.b. prices are regularly quoted not at 
a fixed number of cents but at a given number of points "on" 
the current quotation of futures. 

The spinners may also purchase on so-called "spinner's 
call" terms, i. e., the cotton merchant allows the spinner to 
call for a specific grade of cotton at a stipulated number of 
points "on" the actual price of futures at any time which the 
spinner may elect to name between the making and the ma- 
turity of the contract.^ The actual price in such a purchase is 
not fixed until the spinner "calls," and it is then the price of 
the cotton futures of the month mentioned in the contract 
plus an agreed number of points. The spinner is usually re- 
quired to "call" at least fifteen days before the shipping 

Time of Sale. — The northern spinners usually buy 
about one-half of their annual supply before January first 
and over 60 per cent, before February first. Most of the 
supply, moreover, is shipped as soon as it is purchased, is 
stored in the private warehouses of the mills, and paid for 
within three days after delivery. Although the spinners can 
insure the risk of a change in the price of cotton by hedging 
on the speculative exchanges, they prefer to buy their supply 
early and carry it themselves, rather than to purchase later 
at prices which ordinarily include the cost of storage in public 
warehouses, or to run the risk of being unable to obtain the 
particular grade of cotton desired. The spinners of fine yarn 
are especially apt to purchase early in the season. 

The time of purchase by the southern mills varies more 
widely than that in the northern states. The relatively few 
which require long-staple cotton follow the same practice as 
their northern competitors. The practice of those which use 
short-staple cotton "depends upon the location, size, and fi- 
nancial strength of the individual mills." ^ On the whole 
they buy a somewhat smaller proportion of their supply during 
the picking season, for some of them have less available capi- 
tal, and in some places they are able to draw upon cotton 

* U. S. Bureau of Corporations : Cotton Exchanges, Part I, p. 106. 
'Copeland: p. 182. 



remaining in the hands of nearby growers. Some of the smal- 
ler mills, with very little available capital, buy only as they 
obtain orders for yarn or cloth. 

Sale of Cotton in Foreign Markets 

Methods of Sale. — The methods of selling cotton to foreign 
buyers varies in each of the three principal foreign markets 
for American cotton — Great Britain, Germany and France.^ 
The American cotton exported to Great Britain is mainly sold 
or consigned by American exporting houses and brokers di- 
rectly to Liverpool or Manchester importing merchants. Some 
American exporters, however, have branch houses in England 
to handle their sales, and some Liverpool and Manchester 
houses send buying agents to the large spot markets of the 
South. The Liverpool importing merchants usually sell the 
cotton by sample through two brokers — a selling and a buying 
broker — who stand between the merchants and spinners and 
receive a commission of ^ per cent. each. Though Liverpool 
is the principal British market, some of the cotton is handled 
by Manchester importing merchants, who ordinarily deal di- 
rectly with the spinners. 

American cotton used in Germany is sold mainly in 
Bremen, and to a lesser extent in Hamburg and Havre, 
France. Some cotton is sold direct to German spinners, and 
some is consigned to commissionmen, but the bulk of it is 
sold to Bremen importing merchants who sell to the mills 
through agents. The agents, who receive a commission for 
their services, usually represent several cotton merchants who 
as far as possible are non-competing. 

The leading French market for American cotton is at 
Havre, where the exporters usually sell either to importers or 
merchants, the cotton in many cases being sold to importers 
who in turn sell it to cotton merchants. The sales are made 
through selling and buying brokers, and the official quotations 
and sales are recorded by so-called sworn brokers, each of the 

^Copeland: pp. 354-360. 




brokers receiving a commission of J per cent. The cotton mer- 
chants sell to spinners at the mill centers through agents who 
are paid commissions of from J to 1 per cent. 

The cotton importers and merchants in each of these coun- 
tries commonly hedge their transactions, those of England and 
Germany chiefly on the Liverpool and New York Exchanges, 
and those of France chiefly on the Havre Exchange. The 
spinners of Germany and France also hedge in many cases, 
while those of England do so less frequently, the difference 
being due to the fact that in England the cotton supply is 
held largely by the importing merchants, the mills usually 
keeping but small quantities in their own warehouses, while 
in Germany and France as in the United States the spinners 
buy a larger share of their year's supply early in the season. 

Terms of Sale. — The sales by American exporters to the 
foreign importers, merchants or mills are made on contracts 
similar to those entered into with American spinners, except 
that a larger proportion are made on c.i.f. terms, and that 
the sales are based on net instead of gross weight. The com- 
mon practice is to require the exporter to deduct 6 per cent, 
from the invoice to cover tare, the cotton being sold on so- 
called c.i.f. and 6 per cent, terms. 

The tare rules of the various countries are essentially con- 
fusing and give an element of uncertainty to the foreign 
sales. While the flat gin bales of the growers usually contain 
from 19 to 24 pounds of tare, the 6 per cent, rule practically 
compels the exporters to add sufficient patches to increase 
the tare of a 500-pound compressed bale to 30 pounds. It is 
owing to this practice that the exporter is sometimes said 
to make his profit out of the "patches" which he adds to the 
bale. Such a profit, however, is indefinite and contingent, for 
competition may in some cases require him to share it with 
the grower or local merchant, and the tare rules of the foreign 
markets permit the foreign buyer to present a claim for tare 
in excess of fixed weights which are different in the various 
foreign markets but which come roughly to about 26^ pounds 
on a 500-pound bale. The rules provide detailed methods 
for the ascertainment of actual tare by physical tests, and 





when such tests are made the buyer may present a claim for the 
3 J pounds or other excess tare.^ Since the making of a physi- 
cal test requires time, the foreign buyer, if he is in a hurry to 
receive the cotton, may either waive a claim, or agree to an 
arrangement providing for "friendly allowances," that is, the 
buyer may agree to a deduction which is smaller than the 
actual over-tare. If he is not anxious to receive the cotton 
quickly he will insist upon a physical test. In order to pro- 
tect himself from the possibility of loss resulting from the 6 
per cent, and physical test rules applied in foreign markets, 
the exporter endeavors when possible "to take account of the 
value of this discrepancy of 3J pounds in the price that he 
charges the foreign buyer." ^ 

C.i.f. and 6 per cent, contracts sometimes contain a so- 
called "franchise" clause, providing for a guarantee that the 
invoice weights will not exceed the weight of the cotton upon 
arrival at the foreign market by more than 1 per cent. 
Weights frequently vary because of differences in atmospheric 
conditions, and if such variation reduces the weight by more 
than 1 per cent., the foreign buyer may present a claim for 
the excess. Since the American shipper is not allowed a 
similar claim for an increase in the weight of the cotton, he 
in many cases adds 1 per cent, to the actual weight when he 
makes out his invoice. Both the tare and franchise rules at 
times lead to serious abuses in the cotton trade. 

The Making of Cotton Prices 

Spinners' and Imparters' Prices.— As the prices paid to the 
growers are usually based upon the price of future contracts 
at the great speculative exchanges,^ so also are the prices at 
which the cotton is sold to the mills or foreign importers based 
principally upon the price of futures. The prices at which 
the cotton is sold to the domestic mills or in foreign markets 

*U. S. Bureau of Corporations: Cotton Tare. 
'Ibid., p. 28. 

•Chap. V, pp. 





are usually calculated at a certain number of cents or points 
"on" the price of futures and the difference is sufficient to 
cover all shipping and handling costs, uninsured risks, and a 
profit on the transaction. The prices paid to the growers and 
those received from the spinners and foreign importers are 
of course inseparably interdependent, and it is the farmer's 
price which frequently bears these costs, uninsured risks and 
profits, because conditions of supply and demand are often 
favorable to the buyers. In order that the cotton shippers 
may do business profitably the difference between the prices 
which the growers receive and those which the spinners or 
foreign importers pay must be sufficient to cover all of these 

Cotton shipping costs, which differ according to the point 
of origin and destination, the manner of shipment and other 
considerations may include any or all of the following items : 
freights from the interior, compressing charges, ocean freights, 
fire and marine insurance, wharfage and dock dues, storage, 
weighing, sampling, and inspection fees, brokerage and com- 
missions, exchange supervision, weight fianchise, foreign ex- 
change brokerage, patching and repairing bagging, interest, 
and expenses of doing business such as wages, salaries, tele- 
graph and cable charges. 

The ocean freight rates vary widely from time to time, 
and have increased greatly since 1911. In 1912 the mean 
rates on cotton shipped to Liverpool from New Orleans and 
Savannah were 52.7 and 45.9 cents per 100 pounds re- 
spectively.^ In 1914 during the European War they became 
wholly exorbitant, but it is likely that the abnormal increase 
will not prove permanent. The railroad rates from the in- 
terior to the ports range from less than 20 to over 75 cents 
per 100 pounds, and probably average from 40 to 45 cents. 
The mean coastwise rates from New Orleans and Savannah to 
New York were 25 and 18 cents respectively in 1912 ; and the 
mean railroad rates from Memphis as a typical interior mar- 
ket, were 42.5 cents to New York and 47.5 cents to Boston.^ 

*U. S. Department of Agriculture Year Book (1912), p. 709. 
'Ibid., pp. 707-708. 




The total shipping, handling and trade costs on a ship- 
ment from the interior of the cotton belt to Liverpool have 
not until recently exceeded 1 cent a pound, although in 1913, 
largely because of increased ocean freight, they advanced to 
IJ cents on shipments from some interior points. The total 
costs of a shipment from the interior to northern mills usually 
are somewhat less than those of European shipments. They 
probably average less than 1 cent a pound, because of the 
somewhat lower transportation costs. The total costs in the 
sale of cotton direct from farmer to southern mill usually 
do not exceed 50 cents per bale of 500 pounds. 

The main trade risks of the cotton exporter or broker are 
insured by hedging, but there may be certain additional risks 
such as his inability at times to hedge with exactness and 
uncertainties resulting from tare and franchise rules. All 
such uninsured risks are so far as possible either deducted 
from the farmer's price or added to the spinner's or importer's 

The Factors Affecting Future and Central Market Prices. 

— The factors which enter into the price of future contracts, 
upon which the farmer's, spinner's and importer's prices are 
mainly based, are essentially the same as those outlined in 
connection with the prices ^ paid for grain at the primary 
grain markets. 

It is on the great cotton exchanges at Liverpool, New York 
and New Orleans that a world's cotton price is determined. 
It is there that the cotton buyers and sellers of the world con- 
centrate their judgment as to the future supply of and de- 
mand for cotton. The various factors of supply and demand 
differ from those mentioned in connection with the grain trade 
only in that the cotton trade is on the whole more competi- 
tive, that the foreign cotton market is more important, that 
the trade in raw cotton is free from tariff restrictions, and 
that the effect of crop pests is more widely felt than in the 
grain trade. The extent of the cotton-growing area affected 
by the boll weevil is shown in Map No. VI of the preceding 

^ See chap, iv, p. 88 




The spot cotton prices paid in the great spot markets, 
alike those at Liverpool, New York and New Orleans and 
those at other central cotton markets, usually follow the price 
of future contracts. When, however, the future prices, owing 
to the right to deliver numerous grades on a future contract 
and the failure to properly adjust grade differences, or for 
other reasons, sell at an abnormal discount, or when they are 
temporarily affected abnormally by manipulation, the spot 
prices at the central markets may become the real gauge of 
cotton values. At such times the prices paid to the growers 
and those received from the spinners and foreign importers, 
although based upon the price of futures, are adjusted with 
reference to the spot prices paid in the leading central mar- 


Arnold, J. J. "Financing Cotton," Journal American Banhers 
Association (Jan., 1911), pp. 414-418. 

Financing of Cotton in The Annals of the American 

Academy of Political and Social Science (Sept., 1911), 
pp. 281-292. 

*BuRKETT, C. W., and Poe, C. H. Cotton, Section 3 (1906). 

CoNANT, Luther. The United States Cotton Futures Act, 
American Economic Review (Mar., 1915), pp. 1-11. 

CoPELAND, M. T. Cotton Manufacturing Industry of the United 
States (1913). 

Hammond, M. B. The Cotton Industry (1897), Vol. I. 

*Marsh, a. R. Cotton Exchanges and Their Economic Func- 
tions, The Annals of the American Academy of Political 
and Social Science (Sept., 1911), pp. 253-281. 

*PowELL, G. H. Cooperation in Agriculture (1913), chap 7. 

*New Orleans Cotton Exchange: Annual Report of Secretary 
on the Cotton Crop (annual). 

*New York Cotton Exchange: Annual Report on the Cotton 
Crop (annual). • 

*United States Bureau of Corporations: Cotton Exchanges 

* Cotton Tare (1912). 

^United States Bureau of Crop Estimates (Department of Agri- 
culture) : The Agricultural Outlook (formerly The Crop 
Reporter), issued currently as Farmers' bulletins. la 




May, 1915, title was changed to The Monthly Crop 

•United States Bureau of Crop Estimates (Department of 
Agriculture) : The Cotton Crop Surplus, Farmers' Bul- 
letin No. 641 (Nov. 23, 1914), pp. 9-12. 

* Cost of Producing Cotton, Ihid., pp. 12-14. 

* Production of Upland Long Staple Cotton, Farmers' 

Bulletin No. 651 (Feb. 6, 1915), pp. 12-13. 

United States Bureau of Foreign and Domestic Commert?e 
(Department of Commerce) : Monthly Summary of 
Commerce and Finance (monthly). 

Statistical Abstract of United States (annual). 

• United States Commerce and Navigation Report (an- 

*United States Bureau of Plant Industry (Department of Ag- 
riculture) : "The Classification and Grading of Cotton," 
Farmers' Bulletin No. 591 (July 10, 1914). 

* "The Relation of Cotton Buying to Cotton Growing," 

Bulletin No. 60 (Feb. 16, 1914). 
-"Varieties of American Upland Cotton," Bulletin No. 

163 (1910). 

United States Bureau of Statistics (Department of Commerce), 
Monthly Summary of Commerce and Finance (Decem- 
ber issues for years 1905-1911). 

*United States Census Office: Bulletin on Cotton Production 

* Bulletin on Supply and Distribution of Cotton (an- 
-Thirteenth Census, Agriculture, 1910, Vol. 5 (1913), 

pp. 680-684. 

*United States Department of Agriculture: Improved Meth- 
ods of Handling and Marketing Cotton (1913), in Year 
Book for 1912, pp. 443-462. 

*United States Industrial Commission: Distribution of Farm 
Products, Vol. 6, part III (1901). 

*United States Experiment Station (Department of Agricul- 
ture) : The Cotton Plant, Bulletin No. 33 (1896). 

United States Tariff Board: Report on Cotton Manufactures 

* Beferences designated by * apply also to chap. v. 



One of the most striking characteristics of the trade in 
farm products during the last sixty-five years has been the 
organization of exchanges, and as the greatest produce ex- 
changes are those in the grain and cotton trades, they may 
conveniently be discussed at this point in the organization of 
the trade in farm products. Exchanges are not, however, 
confined to the grain and cotton trades. Flour, provisions, 
flaxseed, timothy, clover and other grass and field seeds, hay 
and straw, hops, and similar farm commodities are commonly 
bought and sold on the grain exchanges; cottonseed products 
are dealt in on some of the cotton and grain exchanges; and 
some produce exchanges have branched out into non-agricul- 
tural commodities. The New York Produce Exchange for in- 
stance has rules for the purchase and sale of petroleum, oils, 
waxes and fats, and pig iron, although there is relatively little 
exchange trading in these commodities. Other agricultural in- 
dustries in which exchanges have been organized are the live- 
stock,^ wool,^ tobacco,^ milk, fruit* and vegetable industries, 
and special exchanges have likewise been organized for the pur- 
chase and sale of certain semi-agricultural commodities such 
as dairy products, green coffee and raw sugar. 

In one sense there is speculation in the purchase and sale 
of practically all agricultural staples whether on exchanges or 
otherwise, for many dealers and manufacturers and an in- 
creasing number of growers purchase or sell when in their 

*Chap. ix, p. 188. 
*Chap. X, p. 216. 
*Chap. xi, p. 231. 
*Chap. xii, p. 256. 




judgment the prices are the most favorable to their particular 
purposes. The term "speculation" when applied to produce 
exchanges, however, has a narrower and more specialized 
meaning, i. e., it refers to the purchase and sale of contracts 
for future delivery or so-called "futures." In this sense the 
exchanges are known either as "spot" or speculative exchanges, 
the former confining their activities solely to a spot or "cash" 
business and the latter providing rules for the purchase and 
sale of contracts for future delivery as well as of spot produce. 
Among the purely agricultural industries it is mainly in the 
sale of wheat, oats, corn, flaxseed, and cotton that a regular 
trade in "futures" is conducted. 

Organization of Speculative Produce Exchanges 

Speculative Grain Exchanges. — In the United States, 
modern grain exchanges began to be organized in the later 
forties of the nineteenth century. The Chicago Board of 
Trade was organized in 1848, the New York Produce Ex- 
change in 1850, the St. Louis Merchants' Exchange in 1854,^ 
the Kansas City Board of Trade in 1869, and the Minneapo- 
lis Chamber of Commerce in 1881. Grain exchanges have 
also been organized in Duluth, Milwaukee, Omaha, Toledo, 
Detroit, Buffalo, Philadelphia, Baltimore, Boston, and in 
nearly all the remaining primary and seaboard grain markets 
of the United States. Practically all the large grain ex- 
changes conduct future as well as cash grain transactions. 

In Europe, the Antwerp Bourse was organized as a mod- 
ern cash grain exchange as early as the middle of the sixteenth 
century.^ The number of foreign exchanges, however, where 
grain futures are bought and sold, is limited, the principal 
foreign speculative grain exchanges being at Winnipeg, Liver- 
pool, Paris and Budapest. There is some speculation on the 
Berlin grain exchange but the sale of grain futures there as 
elsewhere in Germany is hampered by law. 

* Year when it assumed functions of a grain exchange. 
'S. S. Huebner: in the Annals of the American Academy of Polit- 
ical and Social Science, Sept., 1911, p. 1. 




' I 



Speculative Cotton Exchanges.— The Liverpool Cotton 
Association was organized in 1842, the New York Cot- 
ton Exchange in 1870, and the New Orleans Cotton Exchange 
in 1871. A limited volume of futures is also sold on the 
Havre and Hamburg cotton exchanges, but most of the organ- 
ized speculation in cotton is conducted on the great exchanges 
at Liverpool, New York and New Orleans. Trading on the 
Bremen Cotton Exchange, which is the leading German cot- 
ton market, is confined to spot transactions, and the specula- 
tion in futures at Hamburg is limited, for the sale of cotton 
futures in Germany is legally restricted to contracts "for 
actual delivery.'' One of the reasons, likewise, why none of 
the cotton exchanges^ located in the American cotton belt, 
with the exception of the New Orleans Cotton Exchange, are 
future markets, is that the sale of cotton futures is legally 
prohibited in many of the southern cotton states. 

Corporate and Business Organization. — With a few ex- 
ceptions such as the Kansas City Board of Trade which is a 
voluntary association, the large grain and cotton exchanges 
of the United States are regularly incorporated associations. 
They have the usual corporate officials, such as a president, 
one or more vice-presidents, a secretary and treasurer, and a 
board of directors or managers. Members of the exchanges 
hold certificates of membership which upon payment of the 
required transfer fee are transferable to any person eligible to 
membership who is not opposed by the board of directors. 
The holder of such a certificate is said to hold a seat on the 
exchange. While the methods of election to membership vary 
the rules of the Chicago jgoard of Trade are perhaps typical. 
These rules provide that: 

Any male person of good character and credit, and of legal 
age, on presenting a written application indorsed by two mem- 
bers, and stating the name and business association of the ap- 
plicant, after ten days' notice of such application shall have 

*Spot cotton exchanges have been organized at Houston, Mem- 
phis, Little Rock, Augusta, Charleston, Galveston, Mobile, Natchez, 
Vicksburg, Savannah, Selina, Shreveport, St Louis, Norfolk and 



been posted on the bulletin of the exchange, may be admitted 
to membership upon approval by at least ten affirmative ballot 
votes of the board of directors, provided that three negative 
ballot votes are not cast against such applicant, and upon pay- 
ment of an initiation fee of ten thousand dollars, or on pre- 
sentation of an unimpaired or unforfeited membership, duly 
transferred, and by signing an agreement to abide by the rules, 
regulations and by-laws of the association, and all amendments 
that may be made thereto. 

The membership of any large grain or cotton exchange 
comprises a wide range of business men who are interested 
in the purchase, sale, storage, elevation, shipment, exportation, 
manufacture, insurance, transportation or financing of the 
commodities dealt in on the exchange.^ 

In order to conduct their business expeditiously the ex- 
changes are equipped with numerous committees. Each ex- 
change has an arbitration committee to adjust disputed 
claims between members, and a committee of appeals to re- 
view such cases as may be appealed from the arbitration com- 
mittee. Though the exchanges differ as to their other com- 
mittees they ordinarily have committees for complaints, fi- 
nance, floor, membership, trade or rules, transportation, 
house, information and statistics, law, real estate or rooms and 
fixtures, and quotations. They may also have committees, 
bureaus or departments to supervise or perform specific duties 
in connection with weighing, inspection, sampling and grad- 
ing, inspection of elevators or warehouses, registration of 
warehouse receipts and other special matters. Exchanges on 
which various commodities are bought and sold may have 
special committees, bureaus or departments in charge of the 
trade in particular commodities such as grain, provisions or 

An important link in the organization of some of the 
speculative exchanges is the clearing house in which contract 
margins are cleared at the close of each day's business session. 

*For membership of New York Produce Exchange see The An- 
nals of the American Academy of Political and Social Science, Sept., 
1911, p. 218. 




In order to protect both parties to a future contract the ex- 
changes authorize the buyer and seller to require the deposit 
with some designated exchange official, approved bank or 
clearing house of a margin equivalent to 10 per cent, or other 
proportion of the market price. The concerns which have 
become members of the clearing house, instead of calling 
upon each other individually for margins, may settle with 
the clearing house at a certain time each day after all their 
various trades have been checked. 

The produce exchanges do not themselves deal in grain, 
cotton or other farm staples, all buying and selling being done 
by the individual members. The exchanges merely provide 
the trading rules, supervise the trading in various ways, pro- 
vide rooms where it may be conducted, adjust disputes and 
perform various other necessary functions. The income of 
the exchanges is not derived from the purchase or sale of 
cotton or grain by them, but from rents, buildings, invest- 
ments, membership dues, the sale of • price quotations or sim- 
ilar sources, and in some instances from inspection or other 
fees for services rendered. 

Future Contracts 

Since a produce exchange is said to be a speculative ex- 
change if it authorizes the sale of future contracts it is de- 
sirable to define and describe such so-called "future" transac- 
tions somewhat more fully. 

Definition of Future Contracts.— As is stated by the 
United States Bureau of Corporations, "the system of future 
trading in cotton, and, for that matter in other staples sim* 
ilarly dealt in, is based on contracts on the part of the seller 
to deliver, and, consequently, on the part of the buyer to re- 
ceive, at a time subsequent to the making of the contract, a 
certain quantity of the product at a stipulated price. ... A 
future transaction differs from a 'spot' transaction in that 
the latter invariably represents goods actually on hand or in- 
stantly available at the time the contract is made, and, more- 



over, contemplates an immediate or an approximately imme- 
diate delivery." ^ 

Future contracts are entered into not only on the specula- 
tive cotton and produce exchanges, but privately in nearly 
every line of business. A farmer may privately contract to 
deliver a given number of bushels of potatoes at a specified 
price and at a stated time in the future, a miller may similarly 
contract to deliver flour, a steel mill to deliver rails or plates, 
a contractor to complete a building. Strangely, such contracts 
when privately made are not regarded as speculative. The 
cotton and grain exchanges have adopted definite future con- 
tracts for use in speculative transactions and definite rules 
which their members are required to follow. 

The official future cotton contract of the New Orleans Cot- 
ton Exchange for example, is as follows : 


New Orleans, ,19 

In consideration of one dollar in hand paid, receipt of which 

is hereby acknowledged of the City of New 

Orleans, State of Louisiana, have this day sold to (or bought 

from) of the City of New Orleans, State 

of Louisiana, 50,000 pounds, in about 100 square bales of cot- 
ton, growth of the United States, deliverable from approved 
storage places for cotton in the port of New Orleans, between 

the first and last days of next, inclusive, excepting 

holidays as provided in Rule 40 of the Rules of the New Or- 
leans Cotton Exchange for the transaction of the Future Con- 
tract business. 

The delivery within such time to be at seller's option, in not 
more than two approved storage places, upon five business days' 
notice to the buyer, as provided by the Rules of the New Or- 
leans Cotton Exchange. 

The cotton to be dealt with herein or delivered hereunder 
shall be of, or within, the grades for which standards are estab- 
lished by the Secretary of Agriculture, except cotton prohibited 
from being delivered on a contract by the fifth subdivision of 
Section 6 of the United States Cotton Futures Act, and no 
other grade or grades (subject to the United States Cotton 

* Report on Cotton Exchanges : Part I, p. 36. 






Futures Act, Section 5, and subject to New Orleans Cotton 

Exchange inspection and classification) at the price of 

cents per pound for Middling. 

In case cotton of grade other than the basis grade should 
be delivered or tendered in settlement of this contract, the dif- 
ferences above or below the contract price which the receiver 
shall pay for such grades, other than the basis grade, shall be 
the actual commercial differences determined as provided in 
Section 6 of the United States Cotton Futures Act. 

Either party shall have the right to call for a margin as the 
variations of the market for like deliveries may warrant and 
which margin shall be kept good. 

This contract is made in view of, and in all respects subject 
to, the United States Cotton Futures Act, Section 5, and to 
the By-Laws, Rules and conditions, not in conflict therewith, 
established by the New Orleans Cotton Exchange. 


The "Cotton Futures Act"* of August 18, 1914, regulates 
the form of the cotton futures dealt in on American cotton ex- 
changes by providing that a tax of two cents per pound of cotton 
must be paid unless actual delivery is made or unless the con- 
tract conforms to the following specified conditions :' 

(a) It must be* in writing plainly stating the terms of 
such contract and must conform to the rules and regulations 
made pursuant to the act. 

(b) Names and addresses of the seller and buyer must be 

(c) It must be signed by the party to be charged or by his 
agent in his behalf. 

(d) It must specify the quantity of the cotton involved in 
bales or in pounds. 

(e) It must specify the basis grade for the cotton involved 
in the contract, which shall be one of the grades for which 
standards are established by the Secretary of Agriculture, 
except grades prohibited from being delivered. Middling shall 
be deemed the basis grade incorporated into the contract if no 
other basis grade be specified in the contract. 

(f ) It must set out the price per pound at which the cotton 
of such basis grade is contracted to be bought or sold. 

(g) It must state the date when the purchase or sale was 

* See Appendix A, Sections 3, 4, 5, 10. 

* As analyzed in New York Journal of Commerce, Feb. 18, 1915. 

made and the month or months in which the contract is to be 
fulfilled or settled. 

(h) It must provide that the cotton dealt with therein or 
delivered thereunder shall be of or within the grades for which 
standards are established by the Secretary of Agriculture, ex- 
cept grades prohibited from being delivered on a contract. 

(i) It must provide that in case cotton of grade other than 
the basis grade be tendered or delivered in settlement, the differ- 
ences above or below the contract price which the receiver 
shall pay for such grades other than the basis grade shall be 
the actual commercial differences, determined as prescribed 
by the act. 

(j) It must provide that cotton of the following descrip- 
tions shall not be delivered on, under, or in settlement of the 
contract : 

1. Cotton that because of the presence of extraneous matter 
of any character or irregularities or defects is reduced in value 
below that of good ordinary. 

2. Cotton that is below the grade of good ordinary. 

3. If tinged, cotton that is below the grade of low mid- 
dling; or, if stained, cotton that is below the grade of middling. 

4. Cotton that is less than seven-eighths of an inch in length 
of staple, or cotton of perished or immature staple. 

5. Cotton that is "gin cut" or reginned, or cotton that is 
"repacked," or "false packed," or "mixed packed," or "water 

(k) It must provide that all tenders of cotton shall be the 
full number of bales involved therein. (Such variations of the 
number of bales may be permitted as is necessary to bring the 
total weight of the cotton tendered within the provisions of the 
contract as to weight, and necessary variations in the weight of 
the cotton tendered may be permitted, not to exceed 1 per cent, 
of the total weight specified in the contract.) 

(1) It must provide that on the fifth business day prior 
to delivery the person making the tender shall give to the per- 
son receiving the same written notice of the date of delivery, 
and that on or prior to the date so fixed for delivery, and in 
advance of final settlement, the person making the tender shall 
furnish to the person receiving the same a written notice or 
certificate stating the grade of each individual bale to be de- 
livered and identifying each bale with its grade by means of 
marks or numbers. 




(m) It must provide that, in case a dispute arises between 
the person making the tender and the person receiving the 
same as to the quality, or the grade, or the length of staple, 
of any cotton tendered under the contract, either party may 
refer the question to the Secretary of Agriculture for deter- 
mination, and that such dispute shall be referred and deter- 
mined, and the costs thereof fixed, assessed, collected, and paid 
in such manner and in accordance with such rules and regula- 
tions as may be prescribed by the Secretary of Agriculture. 

The contracts and rules of the New York and New Or- 
leans exchanges have been changed in an endeavor to con- 
form to the requirements of the statute. Persons in the 
United States are, however, in practice usually prohibited 
from dealing in futures on the Liverpool or other foreign 
cotton exchanges, because the act similarly applies the two- 
cent tax to foreign contracts unless they conform to certain 
conditions prescribed in the act, or actual delivery of cotton 
is made. Section 11, to which foreign exchanges have not 
thus far seen fit to conform, is as follows : 

Sec. 11. That upon each order transmitted, or directed 
or authorized to be transmitted, by any person within the 
United States for the making of any contract of sale of cotton 
grown in the United States for future delivery in cases in 
which the contract of sale is or is to be made at, on, or in 
any exchange, board of trade or similar institution or place of 
business in any foreign country, there is hereby levied an 
excise tax at the rate of 2 cents for each pound of the cotton so 
ordered to be bought or sold under such contract : PROVIDED, 
That no tax shall be levied under this Act on any such order if 
the contract made in pursuance thereof comply either with 
the conditions specified in the first, second, third, fourth, fifth, 
and sixth subdivisions of section five, or with all the conditions 
specified in section ten of this act, except that the quantity 
of the cotton involved in the contract may be expressed therein 
in terms of kilograms instead of pounds. 

The official future wheat contract of the New York Pro- 
duce Exchange is as follows : 


New York, .19.... 

In consideration of one dollar in hand paid, the receipt of 

which is hereby acknowledged have this 

day sold to or bought of 

bushels of Contract Wheat, which shall be either No. 2 Red 
Winter Wheat, No. 2 Hard Winter Wheat, No. 1 Northern 
Spring Wheat, No. 1 Hard Spring Wheat, or (at a discount of 
two cents per bushel from contract price) No. 2 White Winter 
Wheat, or (at a discount of five cents per bushel from contract 
price) No. 3 Red Winter Wheat, No. 3 Hard Winter Wheat, 
or No. 2 Northern Spring Wheat. New York Inspection, at 

• • • cents per bushel of 60 lbs., deliverable at seller's 

(or buyer's) option 19 

This contract is made in view of, and in all respects sub- 
ject to, the By-Laws and Rules established by the New York 
Produce Exchange, in force at this date. 

Signed .> 

The future contracts which are regularly dealt in on the 
speculative exchanges, are sold by months of delivery and 
future prices are regularly quoted. Thus a statement that 
"May wheat" sells at $1.00 per bushel means that future con- 
tracts calling for delivery iu May are selling at that price, the 
delivery to be made at any time between the first and last days 
of May. The standard unit for speculative grain transactions 
is 5,000 bushels, and when a broker desires to trade in larger 
amounts he offers or bids for '10,'' "20," "50," "100," or 
other quantity, meaning 10,000 or 20,000, etc., bushels. ' Cot- 
ton futures ^re likewise sold in standard units of "50,000 
pounds in about 100 square bales." 

Cotton Futures are Basis Contracts.— Future contracts as 
sold on the speculative exchanges are not specific contracts 
obliging the seller to deliver a particular lot of cotton or bin 
of grain, or even a particular grade of cotton or grain. They 
are "basis" contracts. The price of cotton futures is based 
upon "middling" cotton, but the buyer is not obliged to deliver 
that particular grade. He may deliver numerous other 
higher or lower grades, the number of deliverable grades 
varying on the different exchanges, although those of Ameri- 
can exchanges are restricted by the "Cotton Futures Act." 



According as he delivers higher or lower grades than "mid* 
dling" cotton certain additions to or deductions from the con- 
tract price are made. 

Cotton (xrade Differences. — Such additions or deductions 
to the contract price of cotton futures are based upon "grade 
differences" established in accordance with the rules of the 
cotton exchanges and the provisions of the "Cotton Futures 
Act^' of August 18, 1914. In New Orleans the so-called "com- 
mercial-difference'^ system has prevailed for many years. Be- 
fore the Cotton Futures Act was in effect an exchange com- 
mittee established the difference between middling and each 
of the other deliverable grades daily by establishing the official 
spot quotations for the New Orleans market. Grade differ- 
ences in New Orleans were, therefore, based directly upon the 
current price at which the various grades of spot cotton were 
selling in that market. In Liverpool the method of estab- 
lishing grade differences is similar to that which was employed 
in New Orleans in that they are also based upon the relative 
commercial values of spot cotton. Instead of having a com- 
mittee, however, which meets each day to establish official 
spot quotations, the Liverpool Exchange provides a panel of 
eighteen arbitrators, two members of which fix an appraisal 
or valuation relative to middling whenever any cotton is ten- 
dered on a future contract. The New York Cotton Exchange 
for many years adhered to the so-called "fixed-difference sys- 
tem,'' an exchange committee fixing the grade differences but 
once, twice or three times a year. This method sometimes 
resulted in the arbitrary fixing of differences and between the 
sessions of the revision committee the grade differences for 
delivery on future contracts sometimes were not in harmony 
with the actual value of the various grades of spot cotton. 
In 1914 the New York Exchange therefore adopted a plan 
of monthly revision of grade differences, and instructed its 
revision committee to take into account as nearly as prac- 
ticable the quotations which they obtained from the southern 
spot cotton markets.^ The revised plan which was to have 

*A. E. Marsh: **Tlje New Rules of the New York Cotton Ex- 
change,*' Textile Manufacturers* Journal, May 2, 1914, pp. 79-83. 



become effective in full on December 1, 1914, was adopted 
largely because of the disturbing effect of the fixed-difference 
method upon cotton hedging, and because of frequent charges 
in Congress and elsewhere that the New York market did not 
fairly reflect the world's price for cotton. Meanwhile, how- 
ever, the Cotton Futures Act was enacted and caused the 
New York Cotton Exchange to further revise its methods of 
establishing grade differences. 

Section 6 of this act, effective February 18, 1915, requires 
all American cotton exchanges to establish their contract 
grade differences in accordance with the following provisions : 

Sec. 6. That for the purposes of section five of this act 
the differences above or below the contract price which the 
receiver shall pay for cotton of grades above or below the basis 
grade in the settlement of a contract of sale for the future 
delivery of cotton shall be determined by the actual com- 
mercial differences in value thereof upon the sixth business 
day prior to the day fixed, in accordance with the sixth sub- 
division of section five, for the delivery of cotton on the con- 
tract, established by the sale of spot cotton in the market 
where the future transaction involved occurs and is consum- 
mated if such market be a bona fide spot market; and in the 
event there be no bona fide spot market at or in the place in 
which such future transaction occurs, then, and in that case, 
the said differences above or below the contract price which 
the receiver shall pay for cotton above or below the basis grade 
shall be determined by the average actual comrtiercial differ- 
ences in value thereof, upon the sixth business day prior to 
the day fixed in accordance with the sixth subdivision of sec- 
tion five, for the delivery of cotton on the contract, in the spot 
markets of not less than five places designated for the pur- 
pose from time to time by the Secretary of Agriculture, as 
such values were established by the sales of spot cotton, in such 
designated five or more markets : Provided, That for the pur- 
poses of this section such values in the said spot markets be 
based upon the standards for grades of cotton established by 
the Secretary of Agriculture: And Provided further. That 
whenever the value of one grade is to be determined from the 
sale or sales of spot cotton of another grade or grades, such 
value shall be fixed in accordance with rules and regulations 




which shall be prescribed for the purpose by the Secretary of 

The New York Cotton Exchange now settles future con- 
tracts in accordance with the particular commercial-difference 
plan required by law. The New Orleans commercial-differ- 
ence plan has also been affected, because the United States 
Secretary of Agriculture has not thus far declared New Or- 
leans to be a "bona fide spot market.^' Grade differences at 
New Orleans as well as at New York are now based upon the 
^'average actual commercial differences in value" prevailing 
in not less than five spot markets designated by the Secretary 
of Agriculture.^ 

Grain Futures Are Basis Contracts.—Future grain con- 
tracts are also basis rather than specific contracts, in that they 
permit the delivery of various grades, although a much smaller 
number than in case of cotton futures. The standard Chi- 
cago wheat contract permits a tender of No. 1 and No. 2 red 
winter wheat, No. 1 northern spring. No. 1 and No. 2 hard 
winter and No. 1 velvet chaff wheat. In Minneapolis the 
contract grade for wheat is No. 1 northern. In Duluth, No. 1 
northern spring wheat is the contract grade but No. 2 north- 
ern may be tendered at 5 cents per bushel under the contract 
price. In New York, as is shown in the wheat contract re- 
produced above (page 145), a larger number of grades are 
deliverable because the quantity of available wheat is smaller. 
The practice in the various markets depends largely upon the 
varieties, grades and total quantity of wheat which they, 
handle. Contract grades are similarly established for de- 
livery of corn, oats, and flaxseed futures. Certain grades are 
commonly deliverable at the contract prices, and various others 
at a premium or discount of from ^ to 5 cents per bushel. 

*The Secretary of Agriculture on Feb. 10, 1915, declared the fol- 
lowing markets to be bona fide spot markets: Augusta (Ga.), Boston, 
Charleston, Dallas, Fall Eiver, Galveston, Houston, Little Eock, Mem- 
phis, Mobile, Montgomery, Norfolk, Savannah, and Waco. 

The following are designated as spot markets for the purpose of 
determining grade differences: Augusta (Ga.), Boston, Dallas, Fall 
Eiver, Houston, Little Eock, Memphis, Montgomery, Norfolk and 



Neither cotton nor grain futures are specific as to the time 
' of delivery, the seller having the option of delivering on any 
day of the contract month. 

Short Selling.— An additional feature of future contracts 
is that the seller may or may not have the cotton, grain or 
other product in his possession at the time of sale; Persona 
selling contracts before they have the product on hand are 
in the language of the trade "selling short'' — they are relying 
on their ability to obtain the required cotton or grain before 
the maturity of their contracts. 

Manner of Delivery. — In the primary grain exchanges de- 
liveries on future contracts are commonly made by the ten-^ 
der of negotiable warehouse receipts issued by "regular"^ 
warehouses or elevators, only the officially graded grain in 
such warehouses or elevators being acceptable. In some mar- 
kets, as in New York, however, "railroad elevator receipts," ^ 
"railroad guaranteed certificates," and certificates of grain 
afloat may also be tendered. Deliveries on cotton futures are 
made by the tender of negotiable press or warehouse receipts 
accompanied by official inspection certificates.^ 

The actual warehouse receipts or other evidence of grain 
or cotton are not, however, passed from hand to hand each 
time a contract is sold. To avoid this the seller is permitted 
to issue a so-called "delivery" or "transferable" notice in 
which he liotifies the buyer that he stands ready to deliver 
certain receipts in fulfillment of the contract. The receipts 
are tendered only when a contract is closed out by a delivery 
of the actual cotton or grain which it represents. 

Though future contracts call for the delivery of specified 
quantities of produce, their settlement does not necessarily 
result in such delivery. The rules of the Chicago Board of 
Trade, for example, specify that: 

In case it shall appear that the delivery of any outstanding 
trade or contr act between members of the Association may be 

^ See chap, iv, p. 75. 

» Ibid., p. 81. 

'See chap, xiii, p. 284. 





offset by some other corresponding trade or contract, made by 
the parties with other members of the Association, and the 
parties to such trade or contract, or their authorized agents, 
consent to such offset, such trade or contract shall be deemed 
to have heen settled and any balance between the current mar- 
ket value of the property covered by such trade or contract, 
and the several contract prices shall be due and payable im- 
mediately by the party from whom such balance may be due 
to the party entitled to receive the same under his con- 

Thus two contracts which agree in all particulars except 
price may offset each other and be settled by a payment of 
the price difference. Contracts may in this way be closed 
out by direct settlement between the parties concerned, or so- 
called ''rings" may be formed whereby the future transactions 
of many exchange members may be offset and balances ad- 

Legality and Binding Nature of Futures. —Whether o r 
not actual deliveries of produce are made on all future con- 
tracts, such contracts are binding and in every case represent 
actual grain, cotton or other property. 

The seller of such a contract is absolutely liable for the 
delivery, and if called upon for such delivery by the buyer he 
can in no way avoid compliance with the terms of his contract 
except under unusual conditions especially provided for. . . , 
When the time for making delivery has expired he cannot sell 
out his contract. This fact and the fact that any buyer, from 
the first to the last, can if he chooses hold his contract and 
compel the seller to deliver actual cotton (grain, etc., as the 
case may be) when the date of maturity arrives, give trading 
in futures a character entirely different in principle at least, 
from that of a mere wager or bet.* 

Though futures are unfortunately sometimes bought or 
sold in a spirit of gambling, the contracts nevertheless repre- 
sent actual farm products. In the absence of prohibitive 
statutes and of proof that both buyer and seller of a future 
contract understand it to be a wager upon which no delivery 

' bureau of Corporations ; Cotton Exchanges, Part I, p. 43, 




will be made, the legality and binding nature of such a con- 
tract is upheld by the courts.^ 

Bucket Shops. — Brokerage firms dealing in futures should 
not be confused with ^n)ucket shops" the transactions of which 
in no way concern either the spot or future cotton and grain 
trades. The so-called "purchases" or "sales" which are made 
in bucket shops are not real purchases or sales but mere 
wagers or bets upon the future prices of specified commodi- 
ties. Bucket shops are not only illegal as gambling institu- 
tions but are in most states prohibited by specific anti-bucket- 
shop statutes. 

Options. — Future contracts should likewise be distin- 
guished from "options" which are merely privileges entitling 
the buyer, in return for a consideration or forfeit, either to 
compel the seller to deliver or to receive a specified amount 
of produce at a fixed price and within a prescribed time. An 
option entitling the buyer to deliver a certain amount of 
produce is known as a "put"; one entitling him to call upon 
the seller for such produce is a "call"; and an option which 
entitles the buyer either to deliver or receive is a "straddle." 
Options differ from future contracts in that they do not re- 
•quire delivery unless the buyer chooses to exercise his privilege 
to put or call. They serve as a means of limiting losses in 
produce transactions, but have so frequently been used as mere 
betting devices that in most states they are prohibited alike by 
state statute and exchange regulations. 

Functions of Speculative Exchanges in the Sale of 

Spot Produce 

One of the direct functions of the speculative exchanges 
is that they facilitate and supervise speculation in produce and 
oblige those who desire to speculate to do so in accordance 
with prescribed rules and principles of justice and equity. 
The speculative exchanges, however, perform important func- 

» Irwin vs. Williar, 110 IT. S. 499, 507; C. Parker: ** Govern- 
mental Regulation of Speculation," The Annals of the American 
Academy of Political and Social Science Sept., 1911, p. 150, 

11 ni 



tions in the sale of spot or cash grain, cotton or other pro- 
duce, and it is because of these functions that they are im- 
portant links in the organization of American commerce. 

1. Speculative Exchanges as Spot Markets.— The specu- 
lative exchanges are not merely markets for dealing in futures 
but, with few exceptions, are great spot or cash produce mar- 
kets. This is particularly the case in the grain trade. The 
greatest grain exchanges of the United States are located in 
the primary grain centers of the interior and in the seaboard 
grain markets, and as was preriously stated,^ the bulk of 
the grain handled at these markets is bought and sold on the 
exchanges in accordance with exchange regulations. While 
the Chicago Board of Trade is the greatest speculative grain 
market in the world it is also the greatest cash grain market, 
and the Minneapolis, St. Louis, Duluth, Kansas City and 
New York exchanges are likewise important spot as well as 
speculative markets. Indeed, on many of the primary and 
seaboard grain exchanges the sale of spot grain is of greater 
importance than the sale of futures. 

The grain exchanges establish uniformity in customs and 
usages, promote equitable trade principles, regulate inspection, 
grading, weighing, elevators, warehouse receipts, and storage 
charges and commissions, promulgate rules for delivery, and 
in other ways provide an organized market where cash grain 
may be bought and sold in an orderly manner. As was 
previously explained their spot grain regulations depend 
somewhat upon the extent to which the states undertake to 
regulate the grain trade.^ 

Most of the speculative cotton exchanges, likewise, are im- 
portant spot markets. The New Orleans Exchange is one 
of the largest spot cotton markets in the cotton belt, the Liver- 
pool Exchange is the largest in Great Britain, and the Havre 
Exchange is the largest in France. 

While in recent years from 100,000 to 600,000 bales of 
spot cotton have been annually sold on the New York Cotton 
Exchange, it is the on ly great speculative produce exchange 

^See chap, iv, pp. 84, 87. 
^Ibid., p. 77. 



in the United States which is not a broad spot market. The 
annual spot sales which in the early seventies exceeded 500,- 
000 bales or over 15 per cent, of the crop at times fell to 
less than 100,000 bales or about 1 per cent, during the nine- 
ties.^ In the crop year 1910-1911 the spot sales were reported 
at 404,000 bales and in the following year at 219,000 bales, 
or 3.3 and 1.4 respectively ^ of the season's crop. The princi- 
pal reasons for the relative decline of the spot business are 
that New York is not a convenient cotton-export point, that 
the rail rates to and from the South to New England have 
been so readjusted that it is less expensive to ship cotton 
direct to the mills than to reship it from New York, and that 
the southern planters and dealers are financially less depend- 
ent upon New York bankers than in the past. A portion of 
the cotton supply of New York, moreover, has consisted of 
so-called "overs'' or surplus grades of cotton for which the 
southern spot buyers have no immediate outlet, and this has 
deterred spinners from purchasing spot cotton there. Spin- 
ners likewise contend that they have not been able to buy 
New York futures with a view to requiring actual delivery of 
cotton because the contracts permit the delivery of a wide 
range of grades including the surplus grades for which the 
spinning demand is small.^ The restrictions placed upon the 
grades deliverable on contracts by the "Cotton Futures Act" 
will probably exert an influence upon the quality and quan- 
tity of cotton handled in the New York market in the fu- 

2. Speculative Exchanges Provide a Continuous Market. 
— It is largely because of the great exchanges where there is 
a continuous market in which large quantities are readily 
bought and sold at a moment's notice, that dealers are willing 
to purchase enormous supplies of grain and cotton during the 
harvesting seasons. By providing a continuous market, the 

* U. S. Bureau of Corporations : Cotton Exchanges Part I, pp. 

"New York Cotton Exchange: Annual Eeport of Cotton Crop 
(1910-1911 and 1911-1912). 

• M. T. Copeland : The Cotton Manufacturing Industry, p. 186. 


I -■; I 




1 1 



exchanges and the use of negotiahle warehouse receipts give 
to produce the quality of mobility,^ 

The existence of a continuous market also facilitates the 
financing of the grain and cotton crops. Were it not for the 
ability to hedge and the knowledge that grain and cotton 
always have a ready market on the exchanges, bankers would 
be less ready to provide buyers with the necessary loans, and 
commissionmen and merchants would be more cautious in the 
making of advances or loans to local buyers and producers. 
The ability to hedge, moreover, is absolutely dependent upon 
the existence of a continuous market. The presence of a 
group of speculators facilitates the maintenance of a continu- 
ous market, for some of them, with a view to making a future 
profit, are always willing to accept any quantity offered in 
the market. 

3. Speculative Exchanges Collect and Disseminate Trade 
Information. — The great exchanges act as "clearing houses 
of infonnation." ^ ;N^ot only do the exchanges as such collect 
and publish information and post it on bulletins, but the 
knowledge of their individual members as to crop conditions 
and movements, weather conditions, changes in transportation 
charges, federal and state legislation, competition, cooperation 
and the remaining forces affecting the supply of and demand 
for produce,^ is currently given "expression in the form of 
purchases and sales at prices which are immediately trans- 
mitted by wire to all the trade centers^^and soon made avail- 
able to the general public by the daily press.''' * 

4. Speculative Exchanges Tend to Establish World Prices. 
— ^By providing a continuous market, disseminating trade in- 
formation, and providing an organized market where future 
conditions may be systematically discounted, the speculative 

*S. S. Huebner: '*The Functions of Produce Exchanges/' The 
Annals of the American Academy of Political and Social Science, 
Sept., 1911, p. 11. 

*Ibid., p. 16. 

*See chap, xvii, pp. 350-354. 

*S. S. Huebner: **The Functions of Produce Exchanges/' The 
Annals of the American Academy of Folitical and Social Science, 
Sept., 1911, p. 16. 



exchanges do much to establish world prices for cotton and 
nearly all the leading cereals. It is on these exchanges that 
large numbers of buyers and sellers regularly register their 
knowledge of the present and their judgment of the future 
each time they buy or sell. The telegraph and ticker service 
has so connected the various grain exchanges that they are 
practically a single vast market. Allowing for differences in 
transportation and shipping costs and in some cases import 
tariffs, the grain prices paid at most of the great exchange 
markets throughout the world are in the long run substantially 
uniform; because the many arbitrageurs who buy and sell at 
any of the exchange markets with a view to making a profit 
out of temporary price differences cause the various exchanges 
to seek a common level.^ Wide differences occur only tempo- 
rarily. In the same way there is normally a world's market 
and price for cotton. 

The prices paid in the exchange markets affect not only the 
exchange transactions, but as previously stated the prices re- 
ceived by the growers of cotton and grain, and those paid by 
millers, malsters, cereal manufacturers, spinners and weavers 
are usually based directly upon the current price quotations 
of the primary market in which the grain is bought or sold 
or of the cotton exchange in which the cotton is hedged. 

5. Future Contracts as a Means of Insuring Trade Profits. 
— It is not only by furnishing a continuous market where 
grain or cotton may be bought or sold at any time that the 
exchanges afford protection to producers, dealers, bankers and 
manufacturers. The future contracts which are bought and 
sold on the exchange serve as a means of insuring against the 
loss of trade profits resulting from fluctuations in the prices 
of spot produce. 

The most direct use of futures for this purpose occurs 
when producers, dealers, merchants, exporters or other sellers 
of grain or cotton sell contracts with a view to actually deliver- 
ing the grain or cotton at the agreed price, and when millers, 
spinners or other buyers of produce purchase futures for the 
purpose of requiring such deliveries during given months 

^See chap, iv, p. 56. 



throughout the year. Grain futures are, however, not gen- 
erally used in this way and cotton futures seldom, because 
they are not specific as to the grade which will be delivered 
or the day of the month when deliveries will be made. 

Futures are more commonly used as a means of hedging 
spot transactions. Any dealer or shipper with grain or cotton 
on hand for which no immediate orders are received may 
hedge by selling future contracts on the speculative exchanges. 
Perhaps the simplest illustration is that of a primary market 
grain dealer who has a quantity of grain in store which he 
eventually hopes to ship to the seaboard and by so doing make 
a small trade profit. Assuming that in August a Chicago 
dealer has bought 100,000 bushels of wheat for 90 cents a 
bushel, it is obviously important in the absence of insurance, 
that prices should not decline before he finds his eastern 
buyer. In order to protect himself against this possibility 
he may immediately sell a future contract on the exchange 
for delivery in some future month, say in September. He 
now is party to two distinct transactions — a spot and a future 
transaction — for it is not his intention to deliver his grain 
on the future contract which he has sold. If by the time he 
finds his eastern buyer the price of wheat in Chicago has de- 
clined to 8(> cents it is obvious that he has lostJ^O cents per 
bushel on the grain which he has in store. In that event, 
however, the price of futures will also have declined 10 cents, 
for spot and future grain prices normally fluctuate together, 
and he is therefore able to close out or cover his short sale by 
buying a future at a profit of 10 cents a bushel. The loss on 
his spot grain and the profit on his future transaction, there- 
fore, counterbalance each other and on the basis of Chicago 
prices he has neither a loss nor a profit. Spot prices in the 
seaboard markets, however, are normally higher than those at 
Chicago or other primary markets by an amount sufficient to 
cover shipping and handling costs and yield a trade profit. 
When the price of his grain in Chicago has declined to 80 
cents, he will therefore be able to sell in New York at say 88, 
which will enable him to pay shipping and handling costs and 
make the small trade profit which he originally desired. Had 



the price of grain risen instead of declined his hedge would 
have deprived him of a speculative gain, but would have sim- 
ilarly insured his trade profit. 

In the same way country grain dealers, line elevator com- 
panies, seaboard grain dealers, grain exporters, local cotton 
merchants, cotton exporters and brokers or other grain and 
cotton dealers in many cases hedge grain or cotton which they 
have bought so as to insure their trade profits. Hedging is 
sometimes more complicated than the simple illustration here 
given ; for cotton, for example, may be bought in the interior 
of the South, hedged on the New York or New Orleans ex- 
changes, and ultimately sold in Liverpool or New England, 
but the principle is the same. 

Grain and cotton dealers of all kinds may also hedge grain 
or cotton which they have privately contracted to deliver at 
a fixed price, but which they do not at the time possess. 
Thus it may be assumed that in August the Chicago grain 
dealer, mentioned above, privately contracts to deliver to a 
New York miller in September 100,000 bushels of a particu- 
lar grade of wheat at 90 cents a bushel, but that he does not 
possess this wheat at the time he accepts the contract. He 
agrees to deliver at 90 cents because that price will enable him ' 
to make a trade profit and because it bears the correct rela- 
tion to the price at which he can buy September futures.^ He 
therefore immediately buys a September future for the same 
quantity of wheat at say 83 cents per bushel. Assuming that 
the price of wheat rises and that he buys the 100,000 bushels of 
cash wheat in Chicago for 92 cents, it is obvious that he has lost 
2 cents as a result of the fluctuation in the price of spot wheat. 
The future which he bought would normally, however, also 
have risen to 92 cents, and he could sell it at a profit of 10 
cents per bushel. He would now be able to deliver the 100,- 
000 bushels profitably at 90 cents a bushel, because the 8 cents 
net difference between his loss on the spot transaction and 
profit on the future transaction is adequate to cover shipping 
and handling costs and yield a small trade profit. 

* 90 cents = 82 cents in Chicago plus say 8 cents to cover shipping 
and handling costs and a trade profit. 







Spinners or millers who have bought a supply of cotton or 
grain without having contracted to sell their yarn or flour 
may similarly hedge by selling a corresponding quantity of 
future contracts. If they have contracted to deliver certain 
quantities of yarn or flour before buying the required amount 
of cotton or grain they may hedge by purchasing future con- 
tracts. Textile manufacturers, millers, wholesale merchants 
or others who have on hand a large stock of unsold finished 
cotton or grain products may if they desire hedge by selling 
cotton or grain futures in proportion to the amount of cotton 
or grain required to make a given quantity of the finished 
products. They may in this way avoid loss on their stock of 
goods to some extent because the prices of the finished prod- 
ucts are in a large measure based upon the price of the raw 
materials.^ Since this price relation is not at all times definite 
and exact the hedging system is less commonly used than in 
the purchase and sale of raw cotton and grain. 

The amount of grain and cotton hedging on the part of 
millers and spinners varies in different places. Large flour 
millers in the United States regularly hedge their grain and 
flour transactions. American cotton spinners hedge less fre- 
quently; the practice is still less common among Continental 
European spinners who carry somewhat smaller stocks of raw 
cotton and are further removed from the large speculative ex- 
changes ; and there is relatively little hedging on the part of 
British spinners who usually require the cotton merchants to 
hold all but a small part of the raw cotton supply. The 
greatest amount of hedging is done by the merchants, dealers 
exporters and other grain and cotton middlemen who stand 
between the farmers and the manufacturers, and who desire 
to make a trade profit by distributing the crops. 

The aggregate volume of hedging transactions is enor- 
mous, for a given quantity of grain and cotton may be vari- 
ously hedged by the local buyer, central dealer, exporter, 
manufacturer and any other grain and cott on concerns. It 
'See Eeport of Committee of American Cotton Manufacturers' 
MlyXim'''' 87**^'' Exchanges, Textile Manufacturers* Journal. 



may also be hedged repeatedly by a single owner, for hedges 
may be shifted from month to month until the spot grain or 
cotton is eventually disposed of. Hedging is perhaps the 
principal trade function of the speculative exchanges. 
Strangely enough it enables those grain and cotton concerns 
that wish to avoid the danger of speculation to protect their 
trade profits by entering the speculative market. 

Hedging does not always afford complete insurance of 
trade profits, for prices of spot produce and futures do not 
always fluctuate in exact relation to each other. In the grain 
trade the difficulty of attaining substantially exact hedges has 
been small. In the cotton trade, however, the relation be- 
tween spot and future prices has at various times broken 
. down. Owing to the seller's right to deliver numerous grades 
of cotton including low grades, cotton futures have normally 
sold at a discount. The merchant or spinner can make due 
allowance for this normal discount, but when at times, espe- 
cially in New York, the cotton futures have sold abnormally 
low because of inaccurate grade differences or other reasons, 
the hedge has not afforded complete protection. The exact- 
ness of hedging may also at times be destroyed by undue 
manipulation or the cornering of futures maturing in particu- 
lar months. 

Various provisions of the ''Cotton Futures Act" affect cot- 
ton hedging: (1) The two cent per pound tax payable in 
case a person in the United States buys or sells a future con- 
tract on a foreign exchange not complying with the condi- 
tions imposed by the act prevents Americam cotton exporters 
from hedging on the Liverpool exchange. (2) The restric- 
tions applicable to future contracts made on American ex- 
changes, especially those debarring the delivery of low-grade 
or mixed packed cotton or cotton that is less than seven- 
eighths of an inch in length of staple, has caused some un- 
certainty as to the relation between the price of futures and 
of spot cotton. Whether or not this uncertainty will be a 
permanent one cannot at present (May, 1915) be foretold. 
Thus far, however, the act has confined hedging on the part 
of American cotton dealers or merchants to American ex- 


^ I1 1 



changes and has tended to restrict somewhat the total amount 
of cotton hedging. 

Effect of Spectjlation on Spot Prices 

There are widely varying views as to the effect of specula- 
tion upon the price of spot produce. Cotton and grain grow- 
ers not infrequently contend that it depresses the prices 
which they receive. This view is based mainly on the belief 
that as spot and future prices largely fluctuate in harmony, the 
sale of futures has the same effect as a large increase in the 
supply of grain or cotton. The sale of futures, whether as a 
short sale or otherwise, does not, however, have such a de- 
pressing effect. In the first place every short sale means 
also a purchase at the time and "consequently against the de- 
pressing influence of the short sale there is the uplifting influ- 
ence of the purchase, and the effect of the transaction on 
prices is determined by the relative character of the buying 
and selling and not by the mere fact that a sale has been 
made/' ^ Se^nd, every future is a valid and binding con- 
tract. Every short sale, therefore, before or at the time when 
the contract matures, requires a purchase either of grain or 
cotton or of another future to offset the one that was sold. 
Third, "this popular misconception of short selling overlooks 
the extremely important fact that influential speculators sel- 
dom undertake deliberately to contest natural conditions at 
least for any length of time. Instead they frequently spend 
large sums of money in securing all possible information 
which may tend to influence prices. Instead of fighting nat- ■ 
ural conditions, the ordinary speculator is eager to ascertain 
correctly what the natural conditions are and what their 
probable influence will be, and then to shape his campaign 
in the market in accord with such information." ^ Fourth, 
as was pointed out in a previous chapter, when futures sell 
at an abnormal dis count, as they sometimes do in the cotton 

*U. S. Bureau of Corporations: Cotton Exchanges, Part IV, p. 




trade, the spot prices of the large markets refuse to follow 
the price of futures and the cotton buyers are economically 
compelled to readjust the limits which determine the growers' 
prices.^ Fifth, statistics as well as common trade knowledge 
indicate that in the years when the volume of future sales 
is greatest spot prices are usually higher than when specula- 
tion is at low ebb. 2 

Sixth, the present effect of speculation upon farmers' 
prices is not to be judged by comparison with assumed prices 
such as might be paid if all the abuses of speculation were 
abolished and all its advantages were retained, but by com- 
parison with the prices which would probably be paid if there 
were no speculation whatever. The widespread use of the 
future markets for hedging purposes makes it clear that if 
the selling of futures were everywhere abolished, grain and 
cotton buyers would endeavor to protect their trade profits 
by paying the farmers relatively lower prices. 

While there are farmers who believe that speculation de- 
presses spot prices, so there are some flour millers and cotton 
spinners who are equally positive that it has the opposite 
effect. They usually have in mind the "corners" which some- 
times occur in the speculative markets. A speculative corner 
occurs when the outstanding futures maturing in a particular 
month are bought up by a group of operators who suddenly 
threaten to require delivery. It is only a temporary "squeeze" 
which lasts until the operators who sold short for delivery in 
that month settle at a much advanced price. It is an evil 
mainly because of its disturbing effect upon outstanding 
hedges. The speculative corner should not be confused with 
an actual corner of spot grain or cotton. Such a corner would 
have far-reaching effects, but the grain and cotton crops of 
the United States and of the world have become so vast there 
is little likelihood of such a calamity. 

While the sale of futures usually tends to maintain grow- 

»Chap. V, p. 114. 

Tor cotton price statistics see Bureau of Corporations: Cotton 
Exchanges, Part IV, pp. 272-275. For grain price statistics see U. S. 
Industrial Commission Eeport, Vol. vi, pp. 192-195. 






ers' prices because of their use for hedging purposes, it does 
not follow that the spot prices paid by flour millers and cot- 
ton spinners are thereby advanced beyond the level warranted 
by natural conditions of supply and demand. As stated by 
the United States Bureau of Corporations in connection with 
cotton prices, "regardless of just how the benefit is divided 
as between producer and spinner, it is certain that the hedg- 
ing function, under a properly conducted system, tends, within 
narrow limits, to increase the price of cotton to the producer 
without advancing the price to the spinner/^ ^ 

Speculation affects central market prices in that it tends 
to establish a proper price level earlier than it would other- 
wise be established. It moreover tends to steady spot prices. 
This steadying effect is not to be confused with the fact that 
future prices have in recent years fluctuated more violently 
and more frequently than spot prices. Spot prices are steadied 
by speculation in that without the tendency of the exchanges 
to constantly discount future conditions and their unusual 
efforts to obtain accurate trade information, they would break 
much more sharply between the harvesting seasons. The 
speculative exchanges likewise, as was previously pointed out, 
facilitate the establishment and maintenance of a world's 
price for cotton and the leading cereals. 


CoNANT, L. "The United States Cotton Futures Act," Ameri- 
can Economic Review (Nov., 1915). 

CoPELAND, M. T. The Cotton Manufacturing Industry of the 
United States (1913), chaps, x, xxii. 

BoNDLiNGER, P. T. The Book of Wheat (1908), chap. xiii. 

HuEBNER, S. S. "The Functions of Produce Exchanges," The 
Annals of the American Academy of Political and Social 
Science (Sept., 1911), pp. 1-35. 

Marsh, A. R. "The New Rules of the New York Cotton Ex- 
change," Textile Manufacturers* Journal (May 2, 1914), 
pp. 78-83. 

Seibels, W. T. Produce Markets and Marketing (1911). 
* Cotton Exchanges, Part IV, p. 284. 



Smith, R. E. Wheat Fields and Markets of the World (1908), 
Part ii. 

Sparling, S. E. Business Organization (1906), chap. 9. 

Chicago Board of Trade: Annual Report of the Trade and 
Commerce of Chicago (containing rules and by-laws). 

Committee of American Cotton Manufactures Association: 
Report on Cotton Exchanges, Textile Manufacturers' 
Journal (May 2, 1914), p. 87. 

House of Representatives (Committee on Rules) : "Grain 
Exchanges," Hearings on House Resolution 24 (Mar. 
3-7, 1914). 

New Orleans Cotton Exchange : Rules Governing Future Con- 
tract Cotton Business in the New Orleans Market (1914). 

New York Cotton Exchange: Rules Governing Future Con- 
tract Cotton Business in New York Market (1914). 

New York Produce Exchange: Annual Report (containing 
rules and by-laws). 

United States Bureau of Corporations: Cotton Exchanges 

United States Industrial Commission: Distribution of Farm 
Products (1901), Vol. VI, Part 4. 

"American Produce Exchange Markets" (collection of valuable 
papers). The Annals of the American Academy of Po- 
litical and Social Science (Sept., 1911). 

Series of short papers on Grain Exchanges, National Hay and 
Grain Reporter (May 20, 1911). 










The livestock trade of the United States has reference, 
largely, to the trade in beef cattle, hogs and sheep. Dairy 
cattle are the basis of the country's highly important dairy 
industries, and the value of horses, etc., for draft purposes 
is unquestioned; but neither in dairy cattle as such nor in 
horses is there the systematically conducted trade that is 
carried on in meat-producing animals. 

The trade in beef cattle, hogs and sheep will serve to illus- 
trate an agricultural industry in which there is no systematic 
exchange speculation, in which the growers instead of selling 
locally ship much of their output direct to large central mar- 
kets, and in which the central or primary markets serve some- 
what different purposes than those of the grain and cotton 

Geographical Classification op Livestock Trade 

The CatUe-growing Districts. — The United States Depart- 
ment of Agriculture estimates that the total number of cattle, 
other than dairy cows, on the farms of the United States has 
declined from a maximum of over 51,500,000 on January 1, 
1907, to 35,855,000 on January 1, 1914, and 37,067,000 on 
January 1, 1915. The returns of the Census Office differ 
from these, but likewise show a decline from 50,584,000 on 
June 1, 1900, to 41,178,000 on April 15, 1910. There are in 
addition some 21,000,000 dairy cows. The total number of 
cattle varies considerably at different times of the year, the 
number on July first being about 14 per cent, larger than on 




February first,* and this variation explains a part of the differ- 
ence betVeen the census returns and those of the Department 
of Agriculture. It also shows that the decline in the number 
of cattle during the decade 1900 to 1910, as reported by the 
Census Office, is somewhat exaggerated because their number 
is normally about 4 per cent, larger in the United States on 
June first than on April fifteenth. 

The largest numbers of beef cattle are raised in Texas, 
Iowa, Nebraska, Kansas, California, Missouri, Illinois, Okla- 
homa, Minnesota, Wisconsin, Colorado, South Dakota and 
New Mexico. Although cattle are raised throughout the en- 
tire country, the great beef -producing states are those of th^ 
Mississippi Valley and the Far West. 

They may be divided into three main areas: (1) the 
northwestern grazing grounds, or northern half of the Greal 
Plains including the eastern foothills and many of the pla- 
teaus and valleys of the Rocky Moimtains. In this area, com- 
prising large parts of North and South Dakota, Minnesota, 
western Nebraska, Colorado, Montana and Wyoming, the 
so-called "western'^ grass-fed cattle are grown. (2) The 
southwestern grazing grounds, comprising parts of Texas, 
Oklahoma, Arkansas, New Mexico and Arizona. The cattle 
raised in this area are commonly known as ''Texas range" cat- 
tle. (3) The feeding grounds, including parts of Iowa, Kan- 
sas, eastern Nebraska, Missouri and Illinois. The number of 
beef cattle in this area exceeds that in any other cattle-grow- 
ing district, for not only do the growers raise much native 
stock, but large numbers of Western and Texas range cattle 
are shipped to the feeding grounds to be fattened oii corn 
and to a smaller extent on cottonseed meal, distillery products 
and the coarse grains. Some of the stock feeders are corn 
growers who prefer to market their crop in this way, while 
others are professional feeders who make a business of buying 
the grass-fed cattle and the necessary food and of selling 
the fattened animals at prices sufficiently high to cover all 
costs and yield a profit. 

*U. S. Bureau of Statistics (Department of Agriculture), The 
Agricultural Outlook, Apr. 23, 1914, p. 9, 

































As shown in Map No. VII many beef cattle are grown in 
the Pacific slope, in the North Atlantic states and throughout 
the South, but the cattle trade in these regions is mainly 
a local trade. The populous regions of most of the eastern 
and southern states are compelled to draw upon the three . 
principal cattle-raising areas for much of their beef sup- 

The Hog-raising Area.— The number of hogs in the 

United States has according to census returns also declined 
from 62,868,000 on June 1, 1900, to 58,186,000 on April 15, 
1910, a loss which is counterbalanced by the fact that the 
number is normally about 18 per cent, larger on June first 
than on April fifteenth. The Department of Agriculture esti- 
mates that the number of hogs on the farms of the United 
States on January 1, 1901, was 56,982,000, on January 1, 
1914, 58,933,000, and on January 1, 1915, 64,618,000. Be- 
tween March first and October first there is a seasonal varia- 
tion of about 47 per cent. Iowa, Illinois, Missouri, Indiana, 
Ohio, Nebraska, Texas, Wisconsin, and Arkansas are the great 
hog-growing states of the country. Many are raised in the 
South and in the vfcinity of the large North Atlantic cities, 
but the hog-growing area is largely confined to the corn belt. 
The country's corn crop is used mainly to feed hogs, cattle, 
sheep and other livestock, and the feeding is done largely 
within or adjacent to the corn belt.^ 

The Sheep-growing Districts.— The fiocks from which the 
country obtains its supply of mutton and lamb are raised 
mainly in four districts. (1) The northwestern Rocky Moun- 
tain foothills and northern and central mountain states which 
are particularly important as the mutton-producing part of 
the western sheep ranges. Montana and Wyoming are the 
greatest sheep growers in the United States, and large num- 
bers are also raised in eastern Idaho, Colorado and Utah. (2) 
The southwestern Rocky Mountain foothills and plains, in- 
cluding New Mexico, Texas and Arizona. (3) The Pacific 
Coast states, — chiefly Oregon, California, and western Idaho, 
and (4) the central Mississippi and Ohio River valleys, in- 

* See map No. iv, p. 33. 




I , 



eluding Ohio, Michigan, Missouri, Indiana, Iowa, Kentucky 
and Illinois. {See Map No. VIII.) 

The entire sheep flock of the United States as reported by 
the Census Office comprised 55,363,000 on April fifteenth, 

1910, as compared with 63,374,000 on June 1, 1900. Since 
there is a normal variation of about 20 per cent, between 
April fifteenth and June first, it is seen that the number dur- 
ing the decade remained about stationary. From January 1, 

1911, to January 1, 1915, however, the estimates of the De- 
partment of Agriculture show a decline from 53,633,000 to 
49,956,000. Between February first and June first of each 
year there is a seasonal variation of nearly 41 per cent, in 
the total number of sheep on the farms of the United States. 

N-early 60 per cent, of all the sheep in the United States 
are raised in -the first three districts. It is here that the 
operation of large sheep ranges and ranches constitutes one 
of the main industries. The majority of the sheep are grazed 
m large flocks on open Government ranges, on national forest 
lands, on privately leased lands or on lands which the indiv- 
idual sheep growers or sheep corporations have purchased. 
Some sheep are raised on inclosed or fenced-in ranges and 
ranches but they are more commonly handled under the herd- 
ing system. During the summer they are in many cases 
driven or shipped to the mountain ranges to graze on native 
grasses and forage plants better adapted to sheep than to 
cattle grazing, and in the winter months those which have 
not been sold are moved to lower and more sheltered ranges 
where grazing and feeding maintains them until spring. 

A portion of the sheep found in 'the Central West are 
western range-born sheep and lambs, which as in the case of 
western cattle are taken there to be fed for the market.^ 
The practice is less common than in the cattle industry, but 
there are numerous corn growers and feeders who make a 
business of purchasing western as well as native lambs to feed 
and eventually sell at a profit. 

General Magnitude of livesto ck Industries.— The mag- 

^U. S. Tariff Board: Wool and Manufactures of Wool, vol i 
p. 550. ' ' 



f i 


i 1^ 

■' L 




nitude of the meat-producing livestock industries of the 
United States is seen in that the estimated farm value of the 
country^s cattle (other than dairy cows) on January 1 1915 
was $1,237,376,000, of hogs $637,479,000, and of sheep'$224,- 
687,000. The hog-raising industry of the United States ex- 
ceeds that of any other country in the world; the number of 
cattle is exceeded only in British India; and the number of 
sheep only m Australia and Argentine Republic. 

Volume of Annual Livestock Trade.— While the number 
and value of the food animals in the United States indicate 
the source of the country's meat supply, only a portion of them 
are annually sold in the market or slaughtered. The returns 
of the Census Office show that the per cent, of total slaugh- 
ter to total stock on hand on January 1, 1909, in the case of 
hogs was about 81.2 per cent., cattle 30.8 per cent., cattle other 
than dairy cows 41 per cent., and sheep 28.1 per cent. They 
mdicate that in 1909 the total output of stock including home 
consumption and exports comprised 20,368,000 cattle 52- 
015,000 hogs, and 14,620,000 sheep. If the number slaugh- 
tered on the farms is deducted, it is seen that 17,828,000 cat- 
tle (including calves), 36,636,000 hogs and 14,091,000 sheep 
reached the livestock markets of the United States for slaugh- 
tering and exporting purposes.^ A portion of those slaugh- 
tered on the farms, moreover, are sold by the stock growers 
m local meat markets. The total cattle sold by growers for 
all purposes was in 1909 reported as 27,315,000; and in the 
same year 37,500,000 hogs and 18,991,000 sheep were sold 


Shipping peom Local Points to Central Markets 

In contrast with the growers of grain and cotton who 
usually, though not always, sell their crops locally, the stock 
powers throughout the central and far-western states usually 
ship their beef cattle, hog» and sheep to the large central live- 
stock markets. The animals of western ranches and rang es 

^^ea Thirteenth U. S.- Census (1910), vol. x, pp. 343-345; U. S. 
Bureau of Animal Industry, Annual Report (1914), pp. 253-260. 



are driven to local shipping points, loaded into livestock cars 
and shipped in carload lots to the central stockyards at Chi- 
cago, St. Paul, Kansas City, St. Louis, Omaha, St. Joseph, 
Sioux City and other slaughtering and packing centers. 

Railroad Equipment. — Livestock is shipped to the central 
markets in especially constructed stock cars, equipped with 
stalls or pens, watering troughs and feeding appliances. Hogs 
and sheep are frequently shipped in double-decked cars. The 
cars are mainly owned by the carriers, but some are owned by 
private stock-car companies who lease most of them to the 
railroads upon receipt of a mileage charge of about .6 of a 
cent per mile. The private cars, sometimes known as "palace 
stock-cars,'' are shipped from one section of the West to an- 
other, and tend to supplement the cars provided by the car- 
riers. Some of them are rented to stock owners upon receipt 
of fixed rentals, but it is mainly the owner of exhibition live- 
stock, race horses, etc., who uses the private cars in this way. 
The shipper's freight charges are the same whether his stock 
is shipped to market in private or railroad-owned cars. The 
carriers frequently make up livestock trains which are given 
complete right of way over other freight trains and are 
moved at a speed approaching that of passenger trains.^ 

The railroads are also equipped with stockyards at various 
points along their lines, where the livestock may be unloaded 
for rest, food and water. They are required by law to unload 
the livestock at the end of a specified number of hours. 

Livestock Contract. — Livestock is not shipped on the usual 
bills of lading such as are issued for grain, cotton, or other 
inanimate freight, but on so-called livestock contracts. In 
order to obtain the regular livestock rates the shipper has usu- 
ally been obliged, in the past, to agree to a maximum railroad 
liability not exceeding fixed values per animal, and also to 
agree *^to load and take care of and to feed and water said 
stock while being transported, whether delayed in transit, or 
otherwise, and to unload the same," and to absolve the carrier 
from injuries resulting from '^overloading, crowding upon one 
another, kicking or goring, suffocating, fright, burning of hay 

^See Bureau of Corporations: The Beef Industry, p. 15. 

I J, .-I 







or straw or other material used for feeding or bedding, or by 
fire from any cause whatever, or by heat, cold or by changes 
m weather or for delay caused by stress of weather, by ob- 
struction of track, by riots, strikes or stoppage of labor or for 
causes beyond their control.- Shippers refusing to ship on 
these terms were required to pay increased freight charges. 
A federal act, effective on June 3, 1915, however, prohibits 
mterstate carriers from fixing limited valuations in the future, 
and the form of their livestock contract will therefore have 
to be changed^ The caretakers who are carried on the live- 
stock trams free of charge are usually required to release 
the carreers from all liability for personal injury by sign- 
ing ^the ^release- contained on the back of the livestock con- 

Transportetion Chaxgres-The railroad rates on cattle and 
sheep shipped from local points to the central markets com- 
monly vary according to whether the animils are shipped 
for slaughter, 1. e are -market^ or "fat" stock, or whether 
hey are ^stockers'^ or ^^feeders'^ which will be shipped out of 
the central markets to the feeding grounds to be raised and 
fattened. The former kind of cattle and sheep are shipped on 
the so-called "100 per cent, basis,- and the latter on the "75 
per cent, basis.- The original intention of the 25 per cent 
reduction on stockers and feeders was that such stock would 
be shipped direct from the ranges to the feeding grounds, but 
when the practice of shipping them to the central markets 
arose it was generally applied. The Interstate Commerce 
Commission has refused to permit an increase of the 75 per 
cent rates on the grounds that the market value of stockers 

o'^fafSn k IZ ^'''\'' ^'-'^ P^^ ''' P^"^<^« 1^«« than 
of fat stock, that they are less subject to claims for shrinkage 

and delay and that while market cattle and sheep are fre- 
quently shipped on a rapid schedule, the stockers and feeders 
are more commonly shipped in regular freight trains.^ Since 
hogs are usually shipped to the central markets for slaughter, 
the twofold rate basis does not apply to them. 

^See pp. 316, 317. ' 

'23 I. C. C. Eeporta 7. 



The rates on livestock also vary widely according to points 
of shipment and destination. Usually, however, they are uni- 
form from a given shipping point to the various Missouri 
River markets, somewhat higher to St. Louis and still higher 
to Chicago. The rates from Fort Worth to Kansas City and St. 
Joseph for instance are 33^ cents per 100 pounds, to St. Louis 
39J and to Chicago 45J cents, and from Denver to Kansas 
City and Omaha they are 31 cents as compared with a rate 
of 47 cents to Chicago.^ In the case of livestock shipments 
from points in New Mexico, Texas, and Oklahoma to Fort 
Worth, Oklahoma City, and Wichita, the Interstate Com- 
merce Commission has enforced a mileage scale, under which 
the rates gradually increase with the length of the haul, but 
not in exact proportion to distance. While this basis does not 
apply throughout the West it illustrates the general range of 
livestock rates. Within the region included in the decision 
the rates vary from 5J cents per 100 pounds for a 10-mile 
haul to 8f cents for 50 miles, 17J cents for 200 miles, 32 cents 
for 500 miles, 44 cents for 800 miles and 52 cents for 1,000 
miles. ^ 

The shippers are also required to pay for the feeding of 
the stock in transit. They commonly buy the food en route 
and not infrequently from the carriers who provide a supply 
at the unloading yards. If the carriers do the feeding they 
have a lien on the livestock for the food provided and the 
services rendered. 

Public Regulation. — Nearly all the stock-raising states 
regulate the transportation of livestock by providing in spe- 
cial statutes that the animals shall be unloaded for food and 
rest at the end of a given number of hours — usually 28 — that 
stock cars shall be moved at the rate of at least 18 miles per 
hour on the main line and 12 miles per hour on branch lines, 
and that free transportation and prescribed qaboose facilities 
shall be provided for necessary livestock attendants. Some 
states have additional laws providing for telegraphic informa- 
tion as to stock-car movements, preference to livestock in the 

» 11 I. C. C. Reports 277, 298; 13 I. C. C. Reports 418. 
*22 I. C. C. Reports 160. 





matter of car distribution, etc., but such statutes are not gen- 

The federal government also has enacted a statute which 
requires the unloading of livestock at the end of 28 hours if 
shipped in interstate commerce.* It moreover authorizes the 
Secretary of Agriculture to establish such rules and regula- 
tions concerning transportation as may from time to time 
seem necessary to prevent the spread of contagious and in- 
fectious diseases of livestock,^ and prohibits the shipment of 
livestock from quarantined zones except under such rules of 
"inspection, disinfection, certification, treatment, handling 
and methods of delivery and shipment as the Secretary may 
promulgate.'^ * 



Local Inspection of Livestock 

The Bureau of Animal Industry of the United States De- 
partment of Agriculture not only inspects the interstate and 
foreign shipments of livestock at the central and seaboard 
markets, but in regions where livestock diseases prevail it 
inspects the animals at local points of shipment and in transit. 
Large districts, especially in the southern and southwestern 
states, are quarantined to prevent the spread of Texas and 
other dangerous fevers, disease-carrying ticks, sheep and cattle 
scabies and cattle mange. Livestock so quarantined may not 
be shipped to points outside the quarantined zone without 
local inspection, and in the case of scabies, not without being 
dipped or otherwise treated. Certificates such as are shown 
in Forms 17 or 18 having been issued for animals not actually 
afflicted, they may be shipped to outside markets, but when 
possible, care is taken that they are not unloaded in pens used 
for stock coming from districts which are not quarantined. 
The original certificate is mailed to the Bureau of Animal 
Industry, a copy is attached to the railroad billing accom- 
panying the shipment and another sent to the inspection offi- 

*Act of June 29, 1906. 
•Act of Feb. 2, 1903. 
'Act of Mar. 3, 1905. 








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originating in the County of.,., .. ■ , .,,.. ,.. 

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(Address.) . 


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have been inspected by me and fowfm, m€E from 

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any symptoms of j^^^^^ j^^^^. ^ 

have been inspected and found to have been 
EXPOSKO to the contagion of ^'^xc^fever^ 

have been inspected and found to be larccTiD 

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FOBM 18 




cials of the state in which the shipment originates. Regions 
may be similarly quarantined to prevent the spread of hog 
cholera. Livestock may also be locally inspected and tested 
with a view to detecting tubercular infection and eradicating 
the disease, and railroad cars and stockyards may be inspected 
and disinfected. 

Local inspection by the federal government is supple- 
mented by state statutes providing for the inspection by state 
authorities of sick and suspected animals, the establishing of 
quarantine zones, the dipping of sheep, and the keeping of 
railroad cars and stockyards in a sanitary condition. The 
federal and state authorities sometimes cooperate in the work 
of checking and stamping out diseases by destroying herds of 
afflicted animals, regulating the shipment of livestock from 
quarantined zones, and preventing the shipment of, or use of, 
diseased animals for food purposes. In case herds afflicted 
with contagious diseases are condemned, the owner is com- 
pensated to the extent of their value as food animals, the 
federal and state governments usually sharing the expense. 

Methods op Selling Livestock 

Soles Througli Central Cammissianmen. — The livestock 
shipped by western stock growers to the central stockyards is 
usually sold through commissionmen or brokers. A carload 
is frequently consigned to a commissionman, the owner in- 
trusting him with the entire care and sale of the animals. 
The commissionman divides them into lots or "bunches" with 
a view to obtaining the highest current prices, and sells them 
to meat packers, wholesale slaughterers, feeders, breeders, 
stocker, eastern buyers, speculators or traders, and exporters. 
The selling commissions are regulated by livestock exchanges, 
the general charge per head being 50 cents for cattle, 25 cents 
for calves, and 10 to 15 cents for hogs and sheep, with maxi- 
mum charges per carload ranging from $6 to $12. 

At the time of sale the price is fixed in terms of so much 
per one hundred pounds, the entire amount being determined 


1 1 

I ' 






after the animals have been weighed by official exchange 
weighmasters. The owner is obliged to pay the freight 
charges from local shipping point to the central market, the 
cost of feeding his livestock, a yardage charge, and at some 
places a terminal or transfer charge for switching the cars 
from the railroad to the stockyards. After deducting all such 
charges and^his commission from the amount realized on the 
sale, the commissionman sends the balance to the stockman by 
bank draft or check. Usually even before final settlement the 
non-resident shipper receives a statement of the gross proceeds 
of the sale with necessary deductions. 

In the past the central commissionmen frequently financed 
stock raisers and feeders who required funds between seasons, 
taking chattel mortgages on their livestock as security for 
loans. This system has largely, although not entirely, disap^ 
peared, for a larger number of stockmen have in recent years 
been able to finance themselves, and others are able to obtain 
funds from local banks which are financially stronger than 
they were in the past. 

Cooperative Livestock Shipping Associations^ —A recent 
development in livestock marketing is the formation by stock 
growers of cooperative shipj^ng associations. The movement 
has become of general importance since 1908 but there are 
instances of successful "lamb clubs" organized over twenty 
years ago.^ These associations enable farmers, who do not 
raise a sufficient number of animals to ship individually car- 
load lots, to combine their shipments into lots of sufficient 
size and thus to avoid selling to local dealers. The manager 
of such an association ships the livestock of members directly 
to the central markets, sees that it is properly cared for en 
route, and sells it through central commissionmen in the same 
way that carload shipments are usually sold. The associations 
may, however, obtain bids directly from central market buy- 

T Z l^: '*^"^' '^^^ Cooperative Lamb Club as an Agency for 

Lower Marketing Costs, The Annals of the American Academy of 
^ohttcal and Social Science, Nov., 1913, pp. 216-222; L. D. H. Weld: 
Statistics of Cooperation among Farmers in Minnesota, Minnesota 
!A.gricultural Experiment Station Bulletin No. 146, pp 17-18 

ers. In either case the usual effect of the associations is to 
reduce marketing costs and to obtain higher prices than those 
offered by local livestock dealers. 

Sales to Local Livestock Dealers. — In regions where the 
livestock industry is of secondary importance or wherever the 
individual farmers have less than full carloads of stock for 
sale, and have not organized cooperative shipping associations, 
they may sell to local livestock dealers. These dealers, many 
of whom are themselves farmers, canvass the surrounding 
community for surplus stock, and when they have a carload 
ship it to the central markets where they sell it in the same 
way that large ranchers do. They usually buy on their own 
account, the prices which they pay to the farmers being 
largely the result of personal bargaining. 

Sales to Local Slaughterers and Eetail Butchers. — Farm- 
ers sell a portion of their livestock to local slaughterers and 
retail butchers, some of whom depend upon the surrounding 
agricultural community for all or part of their meat supply. 
In 1909, for example, the Census Office reported that 
7,000,000 cattle and calves, 2,750,000 hogs and 1,750,000 
sheep were slaughtered in retail establishments. 

Private Sales to Packers. — Western ranchers and feeders 
sometimes sell their stock directly to meat-packing concerns 
which may send buying agents to contract privately for the 
delivery of a specified number of carloads. The packers of the 
Mississippi and Ohio Eiver valleys, however, buy most of their 
supply in the public stockyards at current prices which are 
known alike by sellers and buyers. It is only on the Pacific 
Slope that the private sale by stock grower to packer is a com- 
mon method of selling livestock.* At a few places such as 
San Francisco and Portland public livestock markets have 
been established and sales may be made through commission- 
men, but even there the stock growers and packers may deal 
directly with each other. 

Private Sales to Feeders. — While the feeders obtain most 
of their unfed stock in the central stockyards they also buy 

*F. Andrews: Marketing Grain and Livestock in the Pacific 
Coast Eegion, pp. 92-93. 






cattle and sheep directly from ranches and farmers at private 
sale. Relatively few hogs are sold to feeders, because the 
farmers usually fatten them for the market, and recently the 
farmers have to an increasing extent undertaken the feeding 
of lambs. There are many professional feeders, however, who 
fatten native lambs and western sheep and lambs and many 
who feed western range cattle for final sale in the central 


See references designated by an *, appended to chapter IX. 
pp. 200, 201. ' 

l! . 

i : 



As the livestock industry gradually moved from the At- 
lantic seaboard to the western ranges two thousand miles 
inland, the central livestock markets followed in its trail. 
They are in most instances packing and slaughtering centers, 
for the refrigeration car service has made it more economical 
to ship dressed meat and meat products to distant markets 
than to ship the live animals. Livestock is even now shipped 
from the ranges to the central markets, a distance in some 
instances of a thousand miles, and many carloads are shipped 
to eastern markets, but the stock movement is mainly from 
the ranges, ranches, farms and feeding grounds to the central 
markets of the Mississippi and Ohio valleys. 

Central Market Receipts. — Cincinnati was the original 
western packing center, and still remains a market of impor- 
tance, and Cleveland, Detroit, Indianapolis and Louisville are 
also Ohio Valley markets of considerable moment. The prin- 
cipal western market, however, has long been at Chicago, for 
it is there that the great packing concerns first constructed 
their plants and still purchase from 21 to 25 per cent, of the 
packing output of the western livestock states. From 2,- 
500,000 to nearly 3,500,000 cattle, 6- to 9,000,000 hogs, and 
5- or 6,000,000 sheep are annually sold in the Chicago mar- 
ket. Twenty-four railroads carry livestock to Chicago not 
only from the surrounding feeding grounds, but from the 
local shipping points and smaller central markets of the trans- 
Mississippi Valley. 

- As is shown in Map No. VII and Table No. VIII, though 
Chicago is the greatest central market, many others have been 
established beyond the Mississippi River. The packers look 









upon them as ''subsidiary markets," at which some of their 
plants are located and from which their Chicago plants re- 
ceive a part of their stock supply. In the words of one of the 
principal packers, ''not only have the packers built up a 
great central cash market (Chicago), but they have gone 
out to meet the cattlemen by establishing subsidiary markets 
in the heart of the cattle industry. These outposts of the 
packing industry have had their advantages to their owners, 
but I believe they have carried still greater advantages to the 
cattlemen ... in that they shorten his haul to market. This 
not only means a saving of freight, but the avoiding of shrink- 
age in weight and deterioration in quality. It also means that 
at the time of sharp demand he can get his cattle into the near 
market in time to realize the high price, while he would not, 
perhaps, be able to rush them into the distant central market 
before the extraordinary demand would be satisfied and prices 
drop back again. . . . The subsidiary market has immensely 
influenced the general production of a better quality of beef 
by facilitating the feeding or 'finishing' of cattle brought in 
from the ranges. . . . The extension of the packing industry 
to these points has changed the agricultural map of the states 
tributary to these auxiliary markets, making them the richest 
feeding grounds in the country." ^ The chief trans-Missis- 
sippi central markets are at Kansas City, Omaha, St. Louis, 
St. Joseph, St. Paul, Sioux City, Fort Worth, Denver, Wi- 
chita, Ottumwa, Cedar Rapids and Oklahoma City. The re- 
ceipts of the first four of these markets have become so large 
that they can at present scarcely be regarded as mere auxiliary 

The Ohio Valley and middle-western markets, including 
in addition to those previously mentioned (page 181) Mil- 
waukee, Cudahy and Peoria, are chiefly important as hog 
markets, although they also receive large numbers of cattle 
and sheep. 

Central Market Competition. — The livestock buyers at the 
central markets of the West are principally the large western 
packers, smaller western packers an d wholesale slaughterers, 

* J. O. Armour: The Packers, etc., pp. 116-117. 




Receipts and Shipments at Fourteen Central Markets* 















Kansas City 



St JjOuis 


St. Joseph 

St Paul 


Sioux City 





J oo o cro 

Fort Worth 










-r^ irkrvE! 

♦ Bureau of Statistics: Monthly Summary of Finance and Commerce, Dec, 1905, 
and 1910— including cattle, calves, hogs, sheep and lamDs. 
t Wichita, 795. 732. 
: : Wichita, 151, 317. 

eastern packers and slaughterers, exporters, stockers and feed- 
ers The feeders, however, can scarcely be regarded as the 
competitors of packers and slaughterers, for their business is 
mainly to purchase "feeders," prepare them for market and 
then sell them to the packers and slaughterers ; they do not 
compete for fat stock which is ready for the market. Eastern 
packers and slaughterers are competitive factors in the western 
markets but are of declining importance, because long-estab- 
lished practice has shown it to be more economical to ship the 
dressed meat from the West than to ship the live animals. 
Though New York, Boston, Baltimore and Philadelphia each 
receive from 1- to 5,000,000 live animals annually, their pack- 
ers and slaughterers depend largely upon the eastern states 
for their supply, and provide but a small proportion of total 
meat consumption of the cities in which they are located. 




The smaller western packers and slaughterers have always 
been a source of competition in the central markets, but one 
of limited scope. In the cattle trade it has been pointed out 
that although the six largest western packing companies kill 
but 45 per cent, of the annual slaughter of cattle in the entire 
United States, they ''pack nearly 98 per cent, of all the cattle 
killed in the eight leading western packing centers. Their 
proportion of the beef cattle purchased in these eight markets 
is somewhat smaller, because, especially at Chicago, a consid- 
erable number of cattle are bought by other concerns for ship- 
ment alive to eastern points and to Europe where they are 
slaughtered.^' ^ 

On the whole there is less active competition in the cen- 
tral livestock markets than in the primary grain and central 
cotton markets, because the number of competitive buyers is 
more limited. There is also less active competition between 
the livestock centers, because the principal buyers are the 
same in most of the largest western markets.^ Each of the 
six great packing companies, for example, have plants at Chi- 
cago and Kansas City, four of them in Omaha and St. Louis, 
and three in St. Joseph. Inter-market competition in the 
cattle industry is also modified in that to some extent the 
trans-Mississippi markets purchase different grades than are 
bought at Chicago and other middle-western points. They 
depend to a larger extent upon the grass-fed cattle of the 
northwestern and southwestern ranges, while the Chicago 
market receives more native stock and western and Texas 
cattle which have been fattened for the market. Though there 
is some competition between "feeders and stockers" and fed 
cattle, the prices paid for the former are lower and do not uni- 
formly fluctuate with the prices paid at Chicago for corn-fed 

The stock grower is not, however, in a helpless position. 

* Bureau of Corporations: The Beef Industry (1905), pp. xxi, 

» Chief packing companies are : Armour & Co., Swift & Co., Mor- 
ns & Co., Schwarzchild & Sulzberger Co., National Packing Co and 
the Cudahy Packing Co. '* 



The increased demand for meat as compared with its supply 
has in recent years resulted in a higher price for livestock ; 
the foreign market for cattle is at all times available, and may 
be used whenever differences in prices warrant; the smaller 
packers and slaughterers of the West and East are appreciable 
factors in the livestock market; and the probability of "po- 
tential competition" would prevent an unreasonable and per- 
manent depression of livestock prices as compared with the 
price of dressed meats and meat products. During the great 
packing-house strike of 1904, for example, the increased pur- 
chases of the smaller packers and slaughterers did much to 
support the livestock markets. "The strike made evident the 
fact that there are hundreds of slaughtering establishments 
which now operate at much less than their full capacity, and 
that it is a matter of a few days only for them materially to 
increase their output." ^ 

Shipment from Central Markets.— Only about 20 per 
cent, of the hogs, less than 40 per cent, of the cattle and 35 
to over 40 per cent, of the sheep annually sold in the central 
livestock markets of the West are shipped out of them as live 
animals. These shipments, moreover, are gross rather than 
net, for the central markets ship to one another, Chicago and 
other middle-western markets regularly receiving many ani- 
mals which were originally sold by the stock growers in the 
markets of the trans-Mississippi Valley. The bulk of the 
livestock received at the central markets of the West is 
slaughtered by the western packers and wholesale slaughterers 
and is shipped to all parts of the United States and to many 
foreign markets in the form of dressed meat and meat 


The live animals shipped out of the central markets are 
variously disposed of: (1) Feeders are shipped to nearby 
farms and feeding grounds, to be returned to the central mar- 
kets for final sale. Many of the stockers are similarly han- 
dled, although some of them are retained on the farms for 
dairy or breeding purposes. (2) Many of the shipments, par- 
ticularly from the trans-M ississippi markets, are destined to 

» Bureau of Corporations: The Beef Industry, p. 84. 

! -i 






Chicago, Indianapolis, Cleveland, Detroit, Cincinnati, Louis, 
ville and other central markets in the Ohio Valley. (3) Some 
livestock is regularly shipped from the western stockyards to 
eastern livestock markets such as Buffalo and Pittsburgh in 
the interior and :N'ew York, Boston, Baltimore and Philadel- 
phia on the seaboard, to be slaughtered by eastern packers and 

(4) While during the years 1890 to 1908 from 300,000 
to nearly 600,000 live cattle were annually exported to for- 
eign markets, since then the yearly exports have varied from 
100,000 to 200,000. Although these exports pass through the 
ports, they originate largely in the western stock centers, 
mainly in Chicago, and they are destined largely to Great 
Britain. Many forms of meat products are shipped to Ger- 
many, Holland, Belgium, France and other European coun- 
tries, and to the West Indies, Canada, Brazil and other non- 
European countries, but these countries provide a market for 
relatively few American beef cattle. The annual exports of 
American sheep and hogs have never exceeded 270,000 and. 
60,000 respectively. 

The livestock shipped out of the western centers is gen- 
erally purchased at the stockyards of those markets. The 
feeders and stockers are purchased by farmers and profes- 
sional stockmen ; the eastern shipments by eastern packers and 
slaughterers, and the export cattle by western packers and 
export concerns or by exporters located at the eastern ports. 
The stock shipped from one western center to another may be 
purchased either at the shipping or at the receiving center by 
any of the various types of central cattle buyers. 

Relative Importance of Packers and Wholesale Slaugh- 
terers.— The Thirteenth Census of the United States reported 
the relative proportions of the total slaughter of cattle, sheep 
and hogs by packing and wholesale slaughtering plants, re- 
tailers and farmers during the year 1909 to be as shown in 
the table on the following page. 

Functions of Central Markets.— (1) The livestock centers 
of the Mississippi and Ohio valleys serve as great cash mar- 
kets where cattle, hogs, sheep, horses and other meat and 





Per Cent. Killed 

by Packers 

and Wholesale 


Per Cent. Killed 
by Retailers 

Per Cent. Killed 
on Farms 














♦ U. S. Census, Vol. X (1910), p. 344. 

draft animals may be sold by stock growers, feeders and local 
dealers. (2) They provided facilities for the handling, care, 
feeding, weighing, buying and selling of livestock, and the 
financing of sales. (3) Through their exchanges they enforce 
rules governing the purchase and sale of livestock. (4) They 
facilitate the collection of information as to the supply, de- 
mand, and other considerations influencing the trade. (5) 
While livestock prices are not general as are those of grain, 
and cotton, the central markets do much to facilitate the quo- 
tation and publication of prices. (6) They serve as cential 
points from which livestock may conveniently be shipped to 
stockmen, feeders and eastern buyers, and be exported to for- 
eign markets. (7) Most of the central markets are great 
packing and slaughtering centers, indeed, they are the final 
market for about 70 per cent, of their entire receipts of 
cattle, hogs and sheep. (8) Their concentration of large 
numbers of animals at relatively few places, and their close 
connection with packing and slaughtering plants greatly fa- 
cilitate the federal and state inspection of livestock and meats. 

Oeganization and Description of Central Markets 

The Stockyards.— The livestock trade of the central mar- 
kets is conducted at large stockyards owned and operated by 
stockyard companies. Usually nearly all the business of a 
particular market is confined to the yards of a single large 
company, such as the Union Stock Yards and Transit Co. of 





Chicago, the Kansas City Stock Yards Co., the IJnion Stock 
Yards Co. of Omaha, and the St. Louis National Stock Yards. 
These companies are owned largely by the packing concerns 
and the railroads, but the yards are open markets available to 
all who desire to buy or sell livestock. They are located in 
the suburbs of the cities, the yards and nearby packing and 
slaughtering plants being the basis of packing towns of con- 
siderable population and area. The Union stockyards at 
Chicago have an area of 500 acres and are able at one time to 
hold 75,000 cattle, 135,000 sheep, 300,000 hogs and 6,000 
horses and mules.^ 

The stockyards are divided into sections and blocks with 
main driveways, alleys and overhead viaducts. They are fully 
equipped with stock houses and pens, feed and water boxes 
and troughs, running water, receiving and shipping plat- 
forms, railroad switching tracks and scales. Adjacent to 
them are packing and slaughtering plants, and nearby are 
the offices of the commissionmen or brokers who do the buying 
and selling for their customers, and banks where balances 
may be settled. The companies provide the necessary number 
of employees to feed, water and weigh the stock, issue weight 
tickets and keep the yards in a sanitary condition. 

Livestock Exchanges.— The buying and selling is con- 
ducted in accordance with the rules of the livestock exchanges 
which have been organized at the western markets. In case of 
the Chicago Live Stock Exchange, for example : 

Any person of good character and credit, and of legal age, 
whose interests are centered at the Union Stock Yards of Chi- 
cago, Illinois, on presenting a written application, endorsed 
by two members, and stating the name and business avocation 
of the applicant, after ten days' notice of such application shall 
have been posted on the bulletin of the Exchange, may be ad- 
mitted to membership in the Exchange, upon approval by at 
least seven affirmative ballot-votes of the Board of Directors, 
and upon payment of an initiation fee of fifteen hundred dol- 
lars — $1,500 — or on presentation of a certificate of unimpaired 

* Frank Andrews: *'Cost and Methods of Transporting Meat 
Animals,*' U. S. Department of Agriculture Year Book a908) d 
236. ^' ^ 



or unforfeited membership, duly transferred, and by signing 
an agreement to abide by the Rules, Regulations and By-Laws 
of the Exchange, and all amendments that may, in due form, 
be made thereto. 

The organization of the livestock exchanges is similar to 
that of grain and cotton exchanges. They have a president; 
one or more vice-presidents; a secretary; treasurer; and 
arbitration, appeals, prosecuting and other committees. They 
have regulations prohibiting the violation of the stock in- 
spection rules, dealing in condemned livestock, wash sales, 
fictitious price quotations and rebates, improper solicitation 
of livestock consigned to another member of the exchange, 
and other practices regarded as undesirable. They fix the 
hours during which trade may be conducted and the mini- 
mum commissions charged for buying and selling.^ 

The livestock exchanges, however, differ widely from the 
large grain and cotton exchanges in that they are spot or cash 
markets. There are certain so-called "speculators" and "yard- 
traders" at the stockyards, but as speculative "futures" are 
not bought and sold on the livestock exchanges they are 
obliged to conduct a cash business. 

Sales at the Stockyards. — Stock cars are usually, though 
not always, timed so that the livestock arrives at the yards 
early in the morning. The stock is there unloaded, driven to 
selling pens, and fed and watered. The commissionman act- 
ing for the shipper then divides the animals into "bunches" 
of from one to several hundred with a view to adjusting the 
number to the needs of a prospective buyer or to obtaining 
uniformity in character and quality. "Such uniformity," 
states the Bureau of Corporations, "makes it easier to deter- 
mine the value of the bunch than would be the case if the 
animals were mixed. This classification for the purpose of 
sale, which is sometimes made at the instance of the buyers, 
but more often at that of salesmen, is most conspicuous in 
the case of cattle. A mixed shipment of cattle is usually di- 
vided according to sex, cows are separated from heifers, bulls 

^ See chap, viii, p. 177. 





and stags from steers, and often there is a further subdivision 
of steers according to age or quality.'' ^ 

The sales are made in terms of one hundred pounds, final 
settlement being made after the animals have been weighed 
on scales which are usually in charge of weigh masters, and 
which hold from fifty to sixty cattle at one time. The weight 
tickets issued at the scales, which are the basis of settlement, 
show the number of animals weighed, their weight and the 
names of the commissionman and buyer. Animals which the 
federal or state inspectors have not found to be diseased are 
then taken to the packing and slaughtering plants or to ship- 
ping pens for shipment to farms, feeding grounds and eastern, 
western or foreign markets. 

In settling for the livestock, the commissionman, repre- 
senting the original owner, makes out a bill on the basis of 
the weight shown in the scale ticket or record and the price 
per one hundred pounds agreed upon. The buyer indorses 
the bill and returns it to the commissionman with order or 
check attached, and when paid by the bank the accepted bill 
serves as the coinmissionman's receipt of the transaction. He 
then deducts from the gross proceeds the railroad freight 
charges, feeding costs, weighing fees or yardage, transfer 
(switching) charges if any are due, and his commission, and 
pays the balance to the shipper. If his customer is non-resi- 
dent he usually sends a statement of gross proceeds and deduc- 
tions to him immediately after the sale, and a check or draft 
after settlement has been made. There are one or more banks 
of good credit near each of the large stockyards which make 
a special business of financing livestock transactions. 

Marketing Costs. — The cost of marketing livestock varies 
to some extent in the different central markets. Usually there 
is no special charge for the general use of the stockyards, but 
there is a weighing charge sometimes called "yardage" of say 
25 cents per head of cattle, 10 cents of calves, 6 or 8 cents of 
hogs and 5 cents of sheep. In case the stock is fed at the 
yards, the stockyard company also charges for the food at spe- 
cified prices per 100 pounds of hay or alfalfa or per busheLof 

* The Beef Industry, p. 16. 



corn or oats. At Chicago the carriers collect an additional 
terminal charge of $1.00, formerly $2.00 per car, for switching 
the cars to the stockyards. The commissionman's charge like- 
wise is a marketing cost to the shipper, and so are the rail- 
road freight charges, and if the stock is shipped from distant 
points, the cost of feeding en route.^ 

The total cost of shipping a steer from the ranges of the 
northwestern grazing grounds to Chicago and marketing it at 
that center varies approximately from $5 to $9. The various 
items are substantially as follows: 

Low High 

Trailing to local shipping point.... $0.05 $0.25 

Railroad freight 3.85 7.26 

Feed en route (at $2 per car) 16 .32 

Shippers in charge ($12 per car) 08 .08 

Switching charges at Chicago (at $1 

per car) 04 .04 

Feed at Chicago 25 .25 

Yardage at Chicago 25 .25 

Commission at Chicago 50 .50 


Total $5.18 $8.95 

Livestock and Meat Inspection at Central Markets 

There is no public or exchange inspection of livestock for 
the purpose of establishing commercial classes or grades. 
Some of the livestock exchanges have established rules gov- 
erning the dockage and shrinkage of hogs, and have inspectors 
to enforce their rules and determine the number of unmer- 
chantable and inferior hogs in a given lot. Some of them also 
have brand inspectors to ascertain errors or dishonesty in the 
brands of western and Texan cattle, but commercial classifi- 
cation and grading is left to the individual sellers, commis- 
sionmen and buyers. 

Public inspection of livestock at the central yards is con- 
cerned with disease, ^sanitation and public health. The Bu- 

^ See chap, viii, p. 172. 





reau of Animal Industry of the Department of Agriculture is 
equipped with livestock and meat inspectors, chemists, patrol- 
men, etc., for the inspection of interstate and foreign ship- 





Form 19 

ments of livestock and meats in all their stages of slaughter- 
ing, curing, canning or other preparation. The federal in- 
spection laws also provide for sanitary equipment, conditions 

• U.S.* 

QO E 00 

Form QO 

and methods, and prohibit the use of harmful chemicals and 
preservatives and of misleading brands.^ 

^ Acts of Aug. 30, 1890, Mar. 22, 1898, and June 30, 1906. 



When subjected to the ante-mortem examination the ani- 
mals are tagged as "passed," "condemned" or "U. S. suspect," 
each tag being numbered {See Form No. 19). Condemned 
animals may not be sold, while a sale of suspected animals is 
not finally completed until after a post-mortem examination 
has been made. Suspected animals are set apart from those 
which are passed, and are separately slaughtered. 

Any carcass or parts which are found to be unsound dur- 
ing the post-mortem examination at the packing and slaught- 

FORM 21 

ering plants are condemned and sent to the "condenmed" 
rooms to be denatured or tanked so as to make them useless 
for food purposes. Those suspected of disease during the 
post-mortem inspection are marked "U. S. retained" and re- 
moved to separate compartments known as "retaining rooms" 
for final inspection, and if found to be unsound they are later 
sent to the condemned rooms. (See Form No. 20.) 

Particular care is taken in the case of animals or meats 
exported to foreign markets. Many of the export cattle are 
inspected first at the interior markets and again at the ports. 
They are tagged for identification at the interior yards and 
records are kept so that an outbreak of disease may be traced 
back to its origin. The ocean vessels which carry them are 



I 1 

I 7 i\ 




PASSED ifl i 





also inspected as to sanitation, fittings, feed, water, atten- 
dants, etc., so that the animals may arrive in good condition, 
and with the exception of some destinations which have been 
exempted, the vessels may not clear until the Department of 
'Agriculture has issued a certificate of inspection such as is 
reproduced in Form No. 21. Export meat is likewise subjected 
to special inspection. The packages have attached to them 
'^export stamps" such as are shown in Form 22, and may not 

Form 22 — Continued 

be shipped to Great Britain, Europe, Argentina or Mexico 
without obtaining from a government inspector an "export 
certificate" showing the names of the exporter and consignee, 
destination, numbers of stamps, shipping marks, kind of prod- 
uct and weight. (See Forms 23, 24 and 25.) 

As federal inspection applies only to interstate and for- 
eign shipments, some of the states also regulate the construc- 
tion, equipment and Sanitation of packing and slaughtering 
establishments, and make provision for inspection by state 
inspectors. Some municipalities further supplement federal 

Form 23 

Form 24 

:^•=^1^„ T^J^v. 

A A a . ■ 

FoBM 25 




inspection by prohibiting the local sale of unsound meat and 
providing for municipal inspection. 

Livestock Prices 

There is no general wholesale price in the cattle, hog or 
sheep trades as there is in the grain and cotton trades. In 
the cattle markets, for example, although the prices of native, 
western and Texan steers constitute general guides, the actual 
prices paid for particular lots vary widely according to qual- 
ity, character, conditions of production and other considera- 
tions. There is no basis grade of cattle as there is of cotton 
or wheat. There is likewise no individual market or small 
group of markets which determine cattle prices throughout 
the country. Chicago prices show the general movement of 
cattle prices but cannot be taken as a standard, because they 
are usually higher than in markets located further west and 
their fluctuations are influenced by a relatively large propor- 
tion of corn-fed cattle. There is, moreover, no great specula- 
tive livestock market where present and future conditions of 
supply and demand are so systematically discounted as in the 
grain and cotton trades. There is of course a general relation 
between the prices paid at the various central livestock mar- 
kets, for spot exchanges have been organized, telegraphic con- 
nections have been established, the prices of the leading vari- 
eties and classes of livestock are published in the daily press 
and in livestock trade journals, and the principal buyers at 
most of the western markets are the large packing companies. 

Since most of the stock throughout the West is shipped 
direct to central markets by the growers, country and central 
market prices are in many cases synonymous. The prices paid 
by local dealers to farmers who do not sell at the central mar- 
kets bear a general relation to the prices paid in those mar- 
kets, for there frequently is competition between different 
local dealers and between dealers and retail butchers. Central 
market prices, moreover, are published in newspapers and 
farm journals where they can be readily seen by farmers. In 




many instances, however, the country prices are the product 
of individual bargaining, the dealers endeavoring to buy as 
far as possible under the prevailing central market prices. 

The factors influencing the prices paid at the central mar- 
kets are various. As in the case of grain and cotton they are 
primarily affected by considerations of supply and demand. 
To some extent there is a seasonal variation in the supply of 
livestock which affects prices, but the most pronounced varia- 
tion is the periodical increase or decrease of the country's 
total supply of meat animals. Though other considerations 
were instrumental, there can be no doubt that the increase in 
livestock prices since 1906 and 1907 was largely due to a 
shortage in the total supply of available beef cattle, sheep and 
hogs, the first two declining in absolute numbers, and the last 
increasing less rapidly than the market demand. 

The market demand for livestock is affected not only by 
the growth of population and demand for meat in the United 
States, but by the demand for American livestock and espe- 
cially for American meat products in foreign markets, by for- 
eign tariffs and import regulations, and by the amount of 
competition or cooperation between livestock buyers. 

Livestock prices are also influenced by considerations of 
quality.^ Differences in quality largely explain the difference 
between the prices of native and Texan cattle, range cattle and 
corn-fed cattle, steers and cows, cattle and calves, sheep and 
lambs. Quality for meat purposes depends to some extent 
upon the nature of breed. The Texan "long-horns" which 
were so numerous in the past compare unfavorably with the 
fancy beef cattle which are displacing them. Southern "razor- 
backs" compare unfavorably with the improved breeds of hogs 
in the corn belt, and ordinary wool-growing sheep with sheep 
bred both for mutton and wool. 

Weight is also a consideration affecting quality. Price 
records indicate that for stock of a given sex and age, "the 
higher average weight carries with it in each case a higher 
average price." ^ Sex and age are factors of quality, and so 

^See Bureau of Corporations: The Beef Industry, pp. 106-118. 
* Ibid., p. 111. 




are the dressing percentage or amount of beef, pork or mutton 
per one hundred pounds of live weight, the kind of food used, 
and the value or probable value of by-products such as the 
hides, butter fat and lard. 

While the cost of production does not determine livestock 
prices it too exerts an influence. Prices have at times been 
below cost, but unless they are sufficiently high to yield a 
profit to ranchers, rangers, farmers or stock feeders a reaction 
upon the number of animals raised gradually follows. The 
principal cost items* are land and other capital costs, range 
rentals, labor, food or forage, losses from diseases or other 
causes, taxes, fuel for sheep and cattle camps, and in some 
cases the cost of obtaining a water supply and of dipping 
diseased stock. In the case of farmers or feeders who pur- 
chase range stock and young animals to prepare them for 
market the chief items are the cost of the feeders and stockers 
and the cost of corn or other feed. Whether the farmers are 
corn growers or purchase it from others, the price of corn 
affects the price of livestock, for if the price of fed animals 
is relatively too low it becomes unprofitable to feed them with 
corn. In the case of sheep the cost of production is charged 
partly to their mutton and partly to their wool value.^ The 
increase in many of these cost items in recent years is re- 
flected in the increased prices of livestock. 

Similar to cost of production are transportation and mar' 
heting costs which have been discussed in another connection. 
Marketing costs are so small that they exert little influence 
upon prices, but transportation costs are partly responsible 
for the price differences existing between the markets of the 
Far West, those of the Ohio Valley and those on the Atlantic 
seaboard. Differences in transportation costs and quality are 
mainly responsible for the higher level of cattle prices paid 
at Chicago than at the central markets of the trans-Missis- 
sippi Valley. 

General price factors not peculiar to livestock are discussed 

in Chapter XVII. 

*For statistics see Tariff Board: Wool and Manufactures of 
Wool, vol. i, pp. 315-377. 






♦Andrews, Frank. "Cost and Methods of Transporting Meat 
Animals," Department of Agriculture Year Book for 
1908 (1909), pp. 227-244. 

*Armour, J. Ogden. The Packers, the Private Cars and the 
People (1906). 

*DoANE, D. H. "The Cooperative Lamb Club as an Agency 
for Lower Marketing Costs," The Annals of the Ameri- 
can Academy of Political and Social Science, Nov., 
1913, pp. 216-222. 

*Warner, K. E. Paper entitled "Marketing Livestock in Min- 
nesota" (Feb., 1915). 

*Weld, L. p. H. "Statistics of Cooperation Among Farmers 
in Minnesota," Minnesota Experiment Station Bulletin 
No. 146, pp. 17-18. 

* Studies in Marketing of Farm Products (Feb.. 1915) 

pp. 15-37. ^' 

♦Interstate Commerce Commission: 11 I. C. C. Reports 277- 
22 L C. C. Reports 160; 23 I. C. C. Reports 7. 

♦United States Bureau of Animal Industry: Annual Report 

♦United States Bureau of Corporations: The Beef Industrv 
(1905). ^ 

♦United States Bureau of Crop Estimates: 'TLivestock on 
Farms, Jan. 1, 1915," The Agricultural Outlook (Feb. 
6, 1915), Farmers' Bulletin No. 651 (1915). 

United States Bureau of Foreign and Domestic Commerce: 
Annual Commerce and Navigation Report (annual). 

United States Bureau of Statistics (Department of Agricul- 
ture) : "Argentine Beef," The Agricultural Outlook 
(Mar. 18, 1914), Farmers' Bulletin No. 581 (1914) dd 
30-40. ^' 

Livestock of the United States, The Agricultural Out- 
look (Feb. 7, 1914), Farmers' Bulletin No. 575 (1914). 

Meat Animals and Packing House Products Imported 

into Eleven Principal Countries, 1895-1904, Bulletin No 
40 (1906). 

Meat in Foreign Markets, Tariffs of Fourteen Importing 

Nations and Countries of Surplus, Bulletin No. 39 

Meat Supply and Surplus, Bulletin No. 55 (1907). 

* Monthly Variation in Numbers of Farm Animals, Ag- 



ricultural Outlook (Apr. 23, 1914), Farmers' Bulletin 
No. 590 (1914), pp. 8-10. 
United States Bureau of Statistics (Department of Commerce 
and Labor), Monthly Summary of Commerce and Fi- 
nance, December issues (1905-1911). 

* Marketing Grain and Livestock in the Pacific Coast 

Region, Bulletin No. 89 (1911). 
♦United States Census Office, Thirteenth Census: Manufac- 
tures, 1910 (1913), Vol. 10, pp. 343-345. 

* Agriculture, 1910 (1913), Vol. 5, pp. 327-529. 

♦United States Department of Agriculture: Year Book (for 

annual livestock statistics). 
♦United States Industrial Commission : Distribution and Mar- 
keting of Farm Products, Vol. 6, Part 5 (1901). 
♦United States Tariff Board: Wool and Manufactures of 
Wool, Vol. I (1912). 
See also the annual reports of the following stockyards and 
exchanges for livestock statistics : Chicago Union Stock Yards 
Co., Omaha Union Stock Yards Co., St. Joseph Stock Yards 
Co., St. Paul Stock Yards Co., Sioux City Stock Yards Co., 
Denver Union Stock Yards Co., Indianapolis Stock Yards Co., 
Wichita Union Stock Yards Co., St. Louis Merchants' Ex- 
change, Cincinnati Chamber of Commerce, and Cleveland 

Chamber of C ommerce. 

* Keferences designated by an * apply also to chap. viii. 

t ■ 



.1 M 

' 1 . 

I \\ 






The wool trade of the United States differs from the ag- 
ricultural trades considered thus far in the great distance 
which separates the central markets from the principal sources 
of the domestic supply. The ranges of the Rocky Mountains 
are from two to three thousand miles distant from the Boston 
wool market, the largest in the country. The wool trade is 
also affected to a much greater extent by production in foreign 
countries, from 30 to over 40 per cent, of the annual mill 
consumption being imported from abroad, although the 
American output of wool was for many years partially pro- 
tected by high import duties which were not removed until 
December 1, 1913. The methods of buying, selling, concen- 
trating and distributing wool, moreover, contain distinguish- 
ing trade features. 

Supply and Distribution of Wool 

Wool Production in the United States.— The status and 
distribution of the sheep-growing industry of the United 
States as discussed in the preceding chapter, indicates in gen- 
eral the sections of the country which are important in the 
production of wool. The wool trade, however, is more par- 
ticularly concerned with that portion of the industry which 
produces wool as distinct from mutton and lamb. The Census 
Office, for example, reported the total number of sheep in the 
United States as of April 15, 1910, to be 52,839,000, but 
when lambs are excluded from this number it is decreased to 
39,644,000. The National Association of Wool Manufactur- 
ers likewise placed the number of sheep of shearing age on 




April 1, 1910, at 41,999,500, and on April 1, 1913, at 

Wool production, even more than sheep production, is 
confined largely to the three far-western districts — the north- 
western and southwestern mountain ranges and the Pacific 
Slope. (See Map No. VIII.) Not only has the total num- 
ber of sheep raised in the leading central Mississippi and Ohio 
Valley states declined greatly since the seventies and eighties, 
but many of the sheep growers in these states have under- 
taken the production of mutton and lamb in preference to 
wool. Although they produce some of the finest wool grown 
in the United States, their merino and other fine wool flocks 
have been displaced or crossbred with English mutton breeds.^ 
Wool is graded largely on the basis of the percentage of 
merino blood in the sheep, and on this basis it is estimated 
that at present but 23 per cent, of the wool grown east of the 
Mississippi and in Minnesota, Iowa and Missouri grades 
above "half-blood," while 8 per cent, grades as "half-blood," 
and 69 per cent, as f blood and below.^ 

The great decline in the number of sheep raised in the 
Ohio and central Mississippi valleys since the seventies and 
eighties was more than counterbalanced by the growth of the 
sheep industry in the mountain states, particularly in Wy- 
oming, Montana, and Idaho. The number in Texas, Califor- 
nia, and Mexico has declined since 1890, but here as also in 
Oregon, Utah, and Colorado the sheep industry has remained 
an important one. A much larger proportion of the sheep of 
these mountain and far-western ranges, moreover, consists of 
fine wool types, for although the growers of northwestern 
mountain states breed for mutton as well as wool, merino 
and rambouillet sheep still predominate. It is estimated that 
66 per cent, of the total wool produced in the mountain and 
Pacific states grades above, and 22 per cent, as ^-blood 

* In the central Mississippi and Ohio valleys the leading breeds 
are the Shropshire, Oxford and Hampshire. In Kentucky and Ten- 
nessee there are many Southdawns. 

' United States Board : Wool and Manufactures of Wool, vol. i, 
p. 300. 




wool, and but 12 per cent, as f blood or below. In 1913 these 
range states, which are more fully described in Map No. IX, 
produced 65 per cent, of the country's wool clip.* 

Owing to the shift from wool breeds to mutton breeds in 
many parts of the United States, the output of wool did not 
keep pace with the number of sheep on American farms and 
ranges. The maximum wool clip was produced in 1893, when 
348,500,000 pounds were sheared as compared with 296,- 
200,000 in 1913. In 1902-1903, when the Department of 
Agriculture reported the maximum number of sheep, the 
annual wool output aggregated 316,341,000 pounds, and since 
then it has usually averaged about 300,000,000 pounds. The 
decline in the last few years is due chiefly to the unusually 
large number of sheep and lambs sold to packers and slaugh- 

Imports of Foreign WooL— The wool trade differs from 
the grain, cotton and livestock trades in that it is obliged to 
compete for the domestic market against foreign producers. 
In contrast with the commodities previously considered, prac- 
tically no domestic wool is exported from the United States. 
Indeed the country's wool manufacturing industries find it 
necessary annually to import from 30 to over 40 per cent, of 
their raw wool supply. The total production of American 
wool, the imports, and the consumption of wool in recent 
years are shown in table No. IX (page 206). 

Large quantities of foreign wool are purchased in Great 
Britain and some in Belgium, France and Germany, for these 
countries act as brokers in the wool trade, but most of the 
wool imported from abroad originates in Australia, Argen- 
tina, New Zealand, China, Russia and South Africa. Of 
195,293,000 pounds imported in the fiscal year 1913, 111,- 
168,000 consisted of low-grade wools, originating chiefly in 
China, Russia, East India, other Asiatic countries, the Scotch 
highlands and parts of South America where native sheep are 
raised. They were until the revision of the tariff in October, 

* National Association of Wool Manufacturers: Annual Wool 
Eeview (1913), p. 6, not including pulled wool, the origin of which is 
not stated. 


Map IX. — Location op Range CouNTRT^ 

« From U. S. Department of Agriculture, Year Book, 1908, p. 233 (Frank Andrews; 
Cost and Methods of Transporting Meat Animals). 

I !• 






1913, known as Class III wools and were largely used in the 
carpet industry. Twenty-nine million, nine hundred and 
thirty-seven thousand pounds consisted of high-grade wools 
used largely in the worsted and corded woolen industries. 
They were known as Class I or "clothing" wools, and origi- 
nated chiefly in the merino and merino crossbred flocks of 
Australia, Argentina, New Zealand, Uruguay and South 
Africa. The remainder or 16,886,000 pounds consisted of 


Domestic Output, Imports and Consumption of Wool* 

(000 omitted) 


Output t 

Imports t 


Per Cent, of 



1881-1890 (av.).. 




34 4 


44 7 


28 9 


38 8 



* National Association of Wool Manufacturers, Annual Wool Review; Depart- 
ment of Commerce: Annual Commerce and Navigation Reports, and Statistical 

t Years ending April first. 

t Years ending June thirtieth. 

wool of the grade produced by the various types of English 
sheep or crossbreeds other than merino crosses, and of hair 
of the Angora goat (mohair). Alpaca, camel and other ani- 
mals. These imports of the so-called Class II, or "combing^* 
wools, originated chiefly in Great Britain, Canada and Ar- 
gentina, and the imports of hair chiefly in Turkey, South 
Africa, China and South America.* 

The great wool-growing countries of the world are Aus- 
tralia and Argentine Republic, the annual output of the for- 
mer aggregating 700,000,000 and that of the latter 
400,000,000 pounds. New Zealand, Uruguay and South 

* Russian camel's hair was included in No. Ill wools. 

Africa produce less than the United States but their output 
is mainly a surplus available for exportation. 

Competition Between Domestic and Foreign. WooL 
— The extent of competition between domestic and imported 
wool is- not so great as their relative volume would indicate. 
The largest group of imports, or so-called carpet wools, com- 
petes with but small quantities of domestic wool. But 31 per 
cent, of the total American clip grades as | blood or less, and 
much of this is of a quality which does not bring it into direct 
competition with the low-grade carpet wools imported from 
China, Russia and India. Nearly 60 per cent, of the coun- 
try's wool output grades half-blood or higher,* and is used in 
the mills which also purchase imported combing and clothing 
wool. As relatively little domestic wool, however, competes 
with the highest grades of Australian wool, a portion of the 
"clothing*" wool imported from that country may likewise be 
regarded as non-competitive. 

Until December 1, 1913, moreover, when the wool was 
placed upon the free list by the tariff act of October, 1913, 
the competition between domestic and foreign wool was modi- 
fied by protective import duties. The import rates imposed 
on unscoured ''carpef' wools by the acts of 1897 and 1909 
ranged from 4 to 7 cents a pound according to whether their 
value was less or more than 12 cents a pound.^ They were 
low because such wools are in the main not competitive. The 
rates on unscoured "clothing'' wools, however, ranged from 
11 to 22 cents per pound according to whether they were 
washed or unwashed, and those on unscoured "combing" 
wools were 12 cents. The rates on scoured "clothing" wools 
were 33 cents, "combing" wools 36 cents,^ and "carpet" wools 
21 cents per pound. 

* U. S. Tariff Board : Wool and Manufactures of Wool, volJ i, p. 
300—52 per cent, above half-blood and 17 per cent, half-blood. 

' Duties here quoted were those on wool not on the skin. 

» The rates on unscoured wool in other tariff acts since 1860 were 
as follows: 1861 and 1862—50 per cent, 3c. and 9c.; 1864— 3c to 
12c. plus 10 per cent.; 1867— 3c. to 12c. plus 10 per cent., and washed 
Class I wools double; 1872—2 7/lOc. to 10 8/lOc. plus 9 per cent, 
and washed Class I wools double; 1875— 3c. to 12c. plus 10 per cent. 

( ;1 



. M 




The ability to import foreign '^clothing" and "combing" 
wools while these protective duties were in effect was due 
largely to the absolute shortage of domestic wools, and to dif- 
ferences in grade, use and shrinkage. The finest grades of 
Australian wool are not in direct competition with American 
wool, being used in the manufacture of the finest fabrics or 
to mix with domestic wool of somewhat lower grade or d li- 
ferent quality. Much foreign wool, however, is competitive, 
and was able to pay the high protective duties largely because 
the shrinkage of imported "clothing" and "combing'' wools, 
1. e., the difference in weight between "raw"' or "grease" wool 
and "clean" or "scoured" wool, is less than that of domestic 
wools. As compared with a shrinkage of 60 per cent, and 67.3 
per cent, in the finer grades of wool produced respectively in 
the eastern and western parts of the United States, the Tariff 
Board reported an average shrinkage of 47.6 per cent, and 
48.2 per cent, respectively in the finer grades of South Ameri- 
can and Australian imported wools. The difference in the 
case of coarser South American and Australian wools is less 
pronounced but is also a substantial factor in the wool trade. 
Since the tariff rates were constructed on the theory that wool 
shnnks 66f per cent, in the scouring it was to the interest 
of wool importers and foreign exporters to select wool of low 
shrinkage for the American market and to ship the heavier 
wools to Europe.^ Natural differences in shrinkage, more- 
over, were made larger by the practice of "skirting." While 
American wool usually reaches the market substantially as it 
comes from the sheep's back, in the case of foreign wools of 
like character imported under the protective tariff acts of 
1883, 1890, 1897 and 1909, the stained or inferior locks were 
usually skirted or trimmed from the edges of the fleeces. 

Reasons for Extensive Imports of Wool.— The reasons 
why, in spite of high tariff rates, the mills of the United 
States have had to import from 30 to over 40 per cent, of 

and washed Class I wools double; 1883-2|c. to 12c. and washed 
Cass I wools double; 1890-Class I-unwashed lie., washed 22c., 
Class II, 12c., Class III 32 per cent, to 50 per cent.: 1894— /ree 
' U. S. Tariff Board, vol. i, pp. 382-387. 



their raw wool supply, or stated in another way, the reasons 
why with such protection the American raw wool industry 
has not met the needs of the country's mills, lie deeper than 
differences in shrinkage or other immediate trade considera- 
tions. Now that imported wool has been placed on the free 
list the weight of these causes is even greater than formerly, 
because foreign wool is no longer hampered by raw wool duties 
ranging from 4 to 22 cents per pound. 

1. A fundamental cause has been the use of sheep lands 
in many parts of the United States for crops which are in- 
herently more profitable. The movement of the wool-growing 
industry across the entire continent shows how as the frontier 
was pushed westward wool had to make way for more prof- 
itable crops. Everywhere east of the Rocky Mountains the 
lands which formerly produced much wool are now used 
mainly for wheat, corn, oats, hay, vegetables, fruits or other 

• similar crops. It found its last main stronghold on the west- 
ern foothills and mountains, for there the development of 
agriculture has been less rapid and much land is unsuited to 
crops without irrigation. 

2. Similar to the foregoing cause is the fact that in many 
of the sheep-growing regions of the United States, it has been 
found more profitable to produce mutton and lamb than to 
produce wool. As formerly mentioned the flocks of the Ohio 
and central Mississippi valleys have been largely converted 
into meat-producing flocks, and even in Wyoming and Mon- 
tana there has been much crossing with English mutton 
breeds. The Tariff Board reported that receipts from wool 
in the western flocks taken as a whole averaged $1.17 or 45.7 
per cent, of the total receipts per head, as compared with 
$1.31 or 58.7 per cent, in Australia and $1.28 or 60.4 per 
cent, in South America.^ 

3. The operating costs of production have gradually risen 
in the United States and are substantially higher than in the 
countries which produce wool of similar quality. The labor 
costs in the western states where sheep-raising conditions are 
the most favorable average about 82 c ents per head as com- 

*Wool and Manufactures of Wool, vol. i, p. 342. 


■ i 



I M 




pared with 7 cents in Australia and 23 cents in South 
America.^ Forage costs average about 45, 8, and 35 cents per 
head respectively. As was stated by the Interstate Commerce 
Commission: ^The free range was the basis of the sheep 
industry m this region, and the free range no longer exists. 
J he better lands are being taken up by farmers. Much is 
coming under cultivation through irrigation projects. The 
sheep-man to-day must not only pay for the privilege of 
grazing, but he is deprived of his winter feeding grounds and 
must supply artificial food at great expense. In many places 
the water formerly available has become private property, 
and this necessitates great outlay upon the part of the 
ranchman. The serious condition which confronts the grow- 
er of sheep in this western country is the diminishing quan- 
tity and the continually increasing price of land in its va^ 
nous forms; and this is not a temporary but a permanent 
condition.^^ ^ 

Miscellaneous costs, including administration, mainte- 
nance repairs and depreciation, taxation, shearing, wool bags 
movement of flocks between winter and summer ranges etc ' 
average about 83 cents per head in the western state's, 78 
cents m Australia and 57 cents in South America. Total 
operating costs per head average about $2.11, .93 and $1.15 
respectively in the three competing districts. 

The total net charge against a pound of merino wool in 
the western states is estimated by the Tariff Board to be about 
11 cents, m the remainder of the United States about 19 
cents, and in the country as a whole 12 cents. These cost fig- 
ures which were based upon the year 1909-1910 indicate that 
the average price of 24 cents for merino wool paid to growers 
m the Ohio Valley and 15.9 cents paid to western growers 
during that year left an average profit of but 3.1 cents per 
pound to the former and 4.9 or 5 cents to the latter. In later 
years prices have been higher, but as stated by the Tariff 
Board "there is no contingency in sight that ca n by any pos- 

' Cost figures as reported by Tariff Board, Wool and Manufac- 
tures of Wool, vol. i, pp. 333-377. 
' 23 d. C. C. Eeports, 156. 



sibility place domestic growers on an equality in the matter 
of costs with their competitors in South America, Australia 
and the Cape Colonies." 

Distribution by Industries. — The greatest quantity of 
wool is consumed in the worsted industry, large amounts in 
the carded woolen and carpet and rug industries, and smaller 
amounts in the felt goods, hosiery and knit goods and wool 
felt hat industries. The total consumption in the various in- 
dustries in 1909 and 1899 are shown in Table No. X. 

Consumption of Raw WooLf in the United States 




Hosiery and knit goods. 

Carpets and rugs 

Felt goods 


















Per Cent, 
of Increase t 







* Thirteenth United States Census, Vol. X (1910), pp. 77, 106, 125. 
t In the condition purchased in the United States. 
X Minus ( — ) sign indicates decrease. 

.In the census year 1909 all of the various branches of 
wool manufactures consumed 559,500,000 pounds of raw wool. 
In addition much wool in the form of waste and noils ^ passes 
from the worsted to the carded woolen and other woolen in- 
dustries ; many woolen rags and much shoddy ^ is annually 
consumed ; and there is some trading in tops ^ and in woolen 
and worsted yarns. In 1909 wool manufacturers also con- 
sumed over 39,000,000 pounds of animal hair, hair yarn 
and hair noils, and 384,500,000 pounds of cotton and cotton 

* Short, tangled fibers separated from wool in cOmbing process. 

* Wool reclaimed from woolen rags. 

* Continuous strands or ropes of combed wool. 

:( i 





The worsted mills, which are the chief purchasers of wool, 
are located principally in Massachusetts, Rhode Island, Penn- 
sylvania, New Jersey, New York and Connecticut, and more 
particularly in Lawrence, Providence and Philadelphia. New 
York, Pennsylvania and Massachusetts produce nearly 90 per 
cent, of all the domestic carpets and rugs. The carded woolen 
hosiery and knit goods and felt goods mills are located mainly 
in the eastern half of the United States, but are more widely 

Central Wool Markets 

Although some wool is purchased directly from the grow- 
ers by the manufacturers and is shipped directly to the mills, 
the great bulk of raw wool is handled by central wool dealers 
or commissionmen who concentrate it at a small number of 
large central markets. There are two chief groups of central 
markets east of the Rocky Mountains, those on the Atlantic 
seaboard and those of the central West. 

The Eastern Markets.— The former, which are of pre- 
dominant importance alike in the domestic and import trade, 
are located principally in Boston, New York and Philadel- 
phia. Boston is the controlling wool market of the country; 
indeed that market has as much influence over wool prices 
as Chicago has over the prices of grain, possibly more. 
Equipped with huge warehouses and scouring plants, located 
adjacent to the greatest woolen textile district in America, 
favored by a location which enables it to import readily from' 
abroad, and by railroad rates which until recently made it 
difficult for most of the central western markets to compete 
in the handling of wool grown on the mountain ranges, Bos- 
ton has* been able to quote regularly and publish daily prices 
which are largely followed everywhere through out the United 

^Hosiery and knit goods chiefly in New York, Pennsylvania, 
Massachusetts, Illinois, Connecticut, New Hampshire, and Rhode 
Island. Pelt goods chiefly in New York, Massachusetts, New Jersey, 
Connecticut and Pennsylvania. Carded woolen goods chiefly in Massa- 
chusetts, Pennsylvania, Maine, Connecticut, New Hampshire. New 
York and Rhode Island. 



States. The wool receipts of Boston in 1912 aggregated 
360,602,000 pounds, or 74 per cent, of the entire wool con- 
sumption of the United States. 

Central Western Markets.— There are few central wool 
markets in the West because the centers of consumption are 
so largely located in the East, and because Boston, New York 
and Philadelphia have as compared with most western cities 
been favored by relatively low through railroad rates. St. 
Louis and Chicago are wool centers because the through rates 
from the West "break" at those points ; i. e., the through rates 
to the seaboard are made up of the rates from the local ship- 
ping points to these terminals plus the rates from there to 
the seaboard, thus giving St. Louis and Chicago wool dealers 
an opportunity to classify and grade, scour and otherwise 
handle western wool.^ The wool receipts of Chicago in 1912 
comprised 55,778,600 pounds, and those of St. Louis 23,- 
390,000, and their shipments which were higher because of the 
pulled wool obtained from the packers and slaughterers and 
the storage of fleece wool were respectively 98,691,600 and 
39,819,200 pounds. Omaha has become a wool center because 
it has to a limited extent enjoyed a transit privilege, i. e., the 
privilege of stopping western wool and subsequently re- 
shipping it on the balance of the through rate.^ West- 
ern dealers being located in important packing and slaughter- 
ing centers are, moreover, able to increase their supply by 
purchasing "pulled" wool ^ and their middle-western location 
enables them to handle some of the wool grown in the Mis- 
sissippi Valley. The Interstate Commerce Commission has 
recently ruled that transit privileges should be extended to 
other "intermediate points on a direct line upon payment of 
24 cents per 100 pounds and upon the condition that it ap- 
plies only to wool originating west of the Mississippi Eiver, 
which must be kept senarate from wool originating at points 
east of the river.'* * 

U9 L C. C. Eeporta 535, Dec. 14, 1910; 23 I. C. C. Eeports 169, 
Mar. 21, 1912. 

■Wool removed from skins after slaughter. 
*23 I. C. C. Reports 177. 




tl ': I 

Pacific Coast Markets.— Wool grown on the Pacific Slope 
is largely concentrated at the coast terminals, particularly at 
San Francisco in the south and Portland in the north.^ The 
coast terminals are central wool markets chiefly because by 
their location they are enabled to ship to the eastern markets 
either by water or rail. For some years they have enjoyed a 
through blanket rate of $1.00 per 100 pounds on baled wool 
shipped eastward by rail, as compared with typical rates on 
shipments from interior points to Boston, ranging as follows : 
from Spokane, Washington, $2.13 ; The Dalles, Oregon, $1.43 ; 
Boise, Idaho, $2.13; Billings, Montana, $1.75; Cheyenne', 
Wyoming and Denver, Colorado, $1.72^; Ogden, Utah, 
$1.72i; Albuquerque, New Mexico, $1.93; and Fort Worth, 
Texas, $1.84J. The rates from interior points to the eastern 
markets have recently been reduced by the Interstate Com- 
merce Commission, but they are still in excess of $1.00 per 
100 pounds. The rates on sacked wool shipped from Denver 
and Cheyenne to Boston for example have been reduced from 
$1.72J to $1.32 per 100 pounds, and proportionate reductions 
were made on shipments from other mountain and far-western 
interior points.^ 

runctions of Central Wool Markets.— (1) The centra) 
markets are points of concentration where raw wool may be 
stored, classified and graded. (2) They are spot or cash mar- 
kets in which the dealers and commissionmen sell wool to 
manufacturers as it is needed by them either for immediate 
delivery or delivery at a stated time in the future. (3) Al- 
though speculative "futures'' are not dealt in as in the grain 
and cotton trades, there is speculation in wool at some of the 
central markets. (4) They are shipping and distributing 
points from which wool is distributed to the mills or to other 
wool markets. (5) They facilitate the quoting, publication 
and determination of wool prices. (6) Most of them, par- 
ticularly the three great eastern markets, are scouring centers. 

"Also Los Angeles, Sacramento, Seattle, Tacoma, Everett, As- 
toria, etc. 

=^23 I. C. C. Reports 151, Mar. 21, 1912; 25 I. C. C. Reports 185. 
Nov., 1912; 25 I. C. C. Reports 675, Jan. 7, 1913. 





While there are a small number of scouring plants in the 
wool-growing regions, most of the wool — domestic as well as 
foreign — arrives at the central markets as raw or grease wool, 
there to be scoured^ either by the central wool dealers or 
manufacturers. (7) The Atlantic seaboard markets in addi- 
tion are wool-importing centers; and (8) in all the large mar- 
kets, but particularly in Boston, New York and Philadelphia, 
much wool is consumed in locally established mills. 

The Local Purchasing of Wool 

Purchase from American Growers. — Wool is sold by the 
growers either in the "unwashed^' condition just as it comes 
from the sheep's back, or after it has been "washed." In the 
latter case the sheep are driven into shallow streams or vats 
and the wool is washed with water so as to remove some»of 
the foreign substances and perspiration adhering to it. In 
either case the "wool fat" or "grease" is usually not removed 
until the wool has been sold and reaches the scouring plants 
of the central dealers or manufacturers. 

It is usually shipped from the western ranges in sacks 
about 7 feet long, 3 feet in diameter and weighing from 250 
to 350 pounds, each fleece being tied up with a string and 
trodden into the sack. Some wool is baled before it is shipped 
to distant points. Three bales may be tied together and com- 
pressed, or the wool may be taken from the sack's and com- 
pressed into square or rectangular bales fastened with iron 
straps. Baling is done mainly by the dealers rather than the 
growers, and thus far the practice has not become general in 
the United States. The Interstate Commerce Commission, 
however, has recently ordered a difference of 15 per cent, in 
favor of wool shipped from western points in bales having a 
density of at least 19 pounds per cubic foot.^ 

Although the wool trade is similar to the grain, cotton 

^Scouring removes the wool fat, perspiration, dirt and foreign 
substances so as to prepare it for carding and combing. 
»23 I. C. C. Reports 166, 176. 




and livestock trades in that much of the output is concen- 
trated at central markets, it differs in that the principal 
central wool markets are not in the interior but on the sea- 
board, from two to over three thousand miles distant from 
the western ranges. The methods of purchasing the wool 
from the growers are various. 

(1) The most common method throughout the mountain 
districts is the direct purchase by central wool dealers, (a) 
The growers may receive bids from these dealers by mail or 
telegraph and in that way make a private sale, (b) They may 
be visited by agents sent out by the dealers to make bids and 
buy their wool privately, (c) They may sell their clip to the 
agents of the dealers at public sale on the local wool ex- 
changes which have been established at some of the local wool 
shipping points. These local exchanges are spot markets with 
warehouses where growers may bring their wool, list it free 
of charge, and receive bids on it at given times from the vari- 
ous buyers who congregate there. At some points the buyers 
who organize the local exchanges offer free warehousing as 
an inducement to the growers.^ 

The dealers may buy the wool either before or after it has 
been shorn. In some seasons much wool is contracted for on 
the sheep^s back,^ although many growers are opposed to this 

(2) Wool is also consigned by growers to central com- 
missionmen. Some wool-buying houses may act as dealers 
and also receive wool on consignment. Commissionmen sell 
the wool to manufacturers or dealers, the growers paying a 
commission for their services, the railroad and drayage 
charges, storage in case the wool is stored in warehouses, and 
insurance until the wool is disposed of.* 

* See U. S. Industrial Commission, vol. vi, p. 330 
National Association of Wool Manufacturers': The Annual 
Wool Eeview (1912), p. 308. annual 

ybid. (1910), p. 307. 

*U. S. Industrial Commission, vol. vi, pp. 332, 335-336 Com- 
missions in middle-western and eastern centers 1 to U cents dTp 

markets 5 per cent, on smaU lots and 2J per cent on large lots. 



(3) Manufacturers sometimes buy direct from the west- 
ern growers, in any of the ways mentioned in connection with 
wool dealers. This practice has, however, never become com- 
mon because there may be numerous grades in the wool clip as 
offered by the growers. Since the manufacturer desires par- 
ticular grades it has been to his interest to buy from central 
dealers and commissionmen who after sorting, classifying and 
grading can provide the grades which he wishes to use. 

(4) As in case of the livestock trade the wool produced 
in regions where sheep raising is not conducted on a large 
scale is frequently bought by local dealers. These local deal- 
ers may buy on their own account with a view to selling di- 
rectly to central dealers or manufacturers or consigning it to 
central commissionmen ; or they may act as commission agents 
or buyers for central dealers or manufacturers, receiving from 
1 to 2 cents per pound of wool shipped by them. 

(5) Some growers have undertaken to handle their wool 
cooperatively either at the central markets or locally. Some 
five hundred western growers have established a cooperative 
terminal wool warehouse at Chicago in order to handle their 
wool in the same way that wool is handled by commissionmen 
and dealers in the East, so as to retain the middleman's profit, 
discourage the sale of wool on the sheep's back, store their 
wool until sold, and obtain loans from banks up to two-thirds 
of its value.^ Some of the shipping associations or Iamb clubs 
mentioned in connection with the sale of livestock (page 178), 
moreaver, constitute local wool-shipping associations the mem- 
bers of which ship or sell their wool as well as their sheep co- 

The Pnrcliase of Imported Wool. — Most of the wool im- 
ported into the United States is purchased in foreign wool 
markets by the agents or buyers of American wool dealers and 
manufacturers either on public markets or privately. (1) 
Much wool is bought by American buyers at auction in the 
public "wool sales" of London, Liverpool, Antwerp, and other 
European wool centers. At London, for example, Australian, 

*23 I. C. C. Reports 172; National Association of Wool Manufac- 
turers, 23 Annual Wool Beview (1909), p. 522; Ihid. (1910), p. 307. 



'• f 




1 11 



N-ew Zealand, South African and other wools are catalogued, 
exposed m warehouses for examination and auctioned in the 
public salesroom on Coleman Street. (2) Similar public 
auction sales have been established in various interior and 
seaboard wool markets in Australia and New Zealand, Ameri- 
can buyers appearing particularly at Melbourne and Gellong. 
Their purchases, however, are less important than those made 
in London, most of the Australasian wool being imported in- 
directly. (3) Much foreign wool is purchased privately from 
foreign dealers and commissionmen, particularly in South 
America and in the countries which produce carpet and other 
coarser wools, but to some extent also in the British, European 
and Australasian markets where public wool sales have been 
established. (4) Some foreign wool is purchased directly by 
private sale from foreign growers at the ranches or at the 
wool centers of the countries in which it is grown.^ 

Wool Pkices 

It is at the large central markets of the East, particularly 
at Boston, where the prices paid for American wool are de- 
termined, for it is. there that both domestic and foreign wool 
is concentrated. The marhet supply of wool diifers from that 
of any of the agricultural commodities previously discussed 
m that it is more largely influenced by foreign production. 
1 imported wool, being purchased abroad in competition 
with the buyers of many other countries, cannot be bought at 
prices warranted by the domestic wool output, and conse- 
quently the prices of American wool are influenced largely by 
the foreign as well as the available domestic supply. 

The influence of market demand is likewise international, 
tor although European mills do not use American wool they 
are m the market for huge quantities of Australian, New Zea- 
land, South American and South African wool of the grades 
which compete with American wool in the markets of the 
United States. The influence of demand and supply upon 
^See Tariff Board, vol. i, pp. 392-394; 468-470. 



the price of American wool has for many years differed from 
the influence of these factors upon American grain, cotton 
and livestock prices in that domestic wools were protected by 
high import duties. Other domestic farm staples were also 
protected, but since there was until recently little occasion in 
their case to import competitive commodities from abroad 
their prices were not greatly affected by the import duties 
imposed. American wool prices were, however, not main- 
tained by the full amount of the duties paid on foreign woot 
because all imported wools are by no means competitive and 
there are other forces which act independently of the tariff. 

The prices of American wool are to some extent influ- 
enced by the various costs of production previously men- 
tioned, but the international character of the wool trade 
minimizes their effect, for the lower producing costs of 
competing Australian, New Zealand, South American and 
South African wool are also instrumental. Shipping and 
selling costs influence the relative prices at the various mar- 
kets somewhat, but being deducted from the growers' prices 
for the most part, they affect producers' prices or profits more 
largely than the prices paid by the mills. Railroad charges 
of from $1 to $2 per 100 pounds of wool shipped from the 
mountain or Pacific states are but a small percentage of ter- 
ritory wool ^ prices which on May 9, 1914, ranged from 50 to 
60 cents per pound (scoured basis) in the Boston market, and 
rates of 52 cents per 100 pounds from Chicago to Boston do 
not greatly influence the price of unwashed wools of the Ohio 
Valley selling at 20 to 2^ cents per pound. 

Differences in quality and condition largely affect the 
prices paid at the central markets for the various types of 
American wool. Thus the prices vary according to whether 
the wool is sold in the unwashed, washed or scoured condition. 
When Ohio unwashed half-bloods, for example, sell for 24 
and 24J cents per pound the same grade of Ohio washed 
wool sells for 26 and 26^ cents, and the Montana staple half- 
bloods which are sold in the Boston market on the scoured 
basis se ll at 53 cents and 54 cents. The quality o f the^ool 
* Wool grown in Montana, Wyoming and Idaho. 





depends largely upon the percentage of merino blood in the 
sheep, the geographical region in which the wool is produced, 
Its scouring percentage, the frequency of shearing, i e' 
whether 12 or 8 or 6 months' growth, and the absence or 
presence of any special defects. A glance at the Boston price 
quotations will show that these considerations variously in- 
fluence the prices paid at the central markets.^ 

In the West where most of the wool is bought directly by 
dealers and manufacturers or consigned to central commis- 
sionmen, the prices paid to the growers are based upon the 
current prices paid at the central markets. The buyers deduct 
from the latter the estimated shrinkage of the wool, railroad 
charges, packing costs, baling costs if any, drayage, and other 
handling and buying costs. The growers of the northwestern 
and southwestern ranges receive from 2 to 4 cents less per 
pound than the ruling price of the Boston wool market. If 
consigned to a central commissionman the commission charge 
and insurance costs, if any, are also deducted from the grow- 
ers' balance. 

In the Ohio and Mississippi valleys where much wool is 
purchased by local dealers or local commissionmen, and 
where most growers produce wool merely as a side line, the 
difference between the growers' and eastern market prices 
sometimes runs from five to over eight cents per pound be- 
cause the local middleman's profit as well as the usual costs 
are deducted. Here, moreover, little attention is given to 
grade and condition by local buyers, who usually pay a uni- 
form price at any particular time and not infrequently base 
this price upon the less desirable offerings.^ 


V\^RiGHT, C. W. Wool-Growing and the Tariff (1910), Chaps. 

7, 9 and appendices. 
Interstate Commerce Commission: 23 I. C. C. Reports 151 

(Mar. 21, 1912). 

^See chap, xiii, pp. 288, 289. 

* U. S. Tariff Board, vol. i, pp. 560, 590. 



Interstate Commerce Commission: 19 I. C. C. Reports 535 

(Dec. 14, 1910). 
National Association of Wool Manufacturers: Annual Wool 

Review, Bulletin of the Association. 
United States Department of Agriculture : Year Book and The 

Monthly Crop Report (for statistics and prices). 
United States Industrial Commission: Distribution of Farm 

Products, Vol. 6, part 9 (1901). 
United States Tariff Board : Wool and Manufactures of Wool 

(1912), Vol L 

{See also references on trade in livestock, pp. 200, 201. 








Another of the great American agricultural staples, the 
annual value of which exceeds that of the country's wool clip, 
is leaf tobacco. Since 1909 the crop has ranged from nine 
hundred thousand to one billion pounds, valued at from 
$85,000,000 to $122,000,000. India, Eussia, Hungary, Java, 
Japan, Cuba, Germany, Turkey and other countries produce 
much leaf tobacco, but none grow one-half the crop annually 
grown in the United States, and none export one-half the 
quantity annually exported from this country. Leaf tobacco 
is important both in domestic and foreign commerce, and the 
trade methods pursued are in many respects distinctive. 

Leaf Tobacco Districts and Types 

As in the case of cotton, leaf tobacco is confined to certain 
districts within which it constitutes the staple agricultural 
crop. Similarly, from the botanical standpoint many vari- 
eties are grown. Commercially, however, leaf tobacco is clas- 
sified in greater detail than any of the agricultural staples 
previously discussed because the finished tobacco products 
made out of the leaf tobacco vary widely and require distinc- 
tive qualities in their raw material. 

Commercial Classes and Types. — The tobacco trade gener- 
ally recognizes two chief classes of leaf tobacco: (1) cigar 
tobacco and (2) chewing, smoking, cigarette, snuff and export 
tobacco. These classes which are based upon the adaptation 
of the leaf tobacco for certain uses are sometimes subdivided 
more fully, each of the groups comprising the second class 
being regarded as a separate class ; but there is so much over- 




lapping in the use of leaf tobacco for the making of chewing, 
smoking, cigarette and snuff tobacco and for exportation that 
the twofold classification is more generally accepted. 

Leaf tobacco classes are in turn made up of types based 
upon the possession of certain qualities such as color, strength, 
elasticity, body and flavor, or upon the method of curing such 
as sun-cured, air-cured, flue-cured or cured by open fires.^ 
The standard grouping of leaf tobacco into classes and types, 
and the quantity of each class and type produced in recent 
years is shown in table No. XI (page 224). 

Leaf tobacco types are further divided into a large and 
varying number of grades, which are based upon different de- 
grees of excellence in quality. Burley tobacco, for example, 
is commonly assorted by the growers into six grades,^ and 
yellow tobacco into from six to fifteen.^ When repacked, re- 
sorted and rehandled by dealers, packers or manufacturers the 
number of grades may be further increased so as to disclose 
in detail any differences in quality which the leaf tobacco of 
any given type may possess. 

Leaf Tobacco Districts. — As shown in the accompanying 
map (No. X) and in Table No. XI, the cigar leaf types are 
grown principally in certain districts of Pennsylvania, Wis- 
consin, New England, Ohio, New York, Georgia and Florida. 
The great bulk of cigar leaf is grown in the northern states. 
Eleven counties of Pennsylvania, particularly Lancaster 
County, which usually produces more tobacco than any other 
county in the country, grow leaf tobacco which is used largely 
for cigar fillers, although a small per cent, is used for cigar 
wrappers and binders.* Fourteen counties in southern and 
western Wisconsin grow leaf tobacco which is used mainly for 

* J. B. Killebrew and H. Myrick: Tobacco Leaf, p. 46. 

* Flyings or sand leaves or so-called **spod," trash, Ings, bright 
leaf, red leaf and tips. 

* Danville, Va., grades are: A Wrappers, (1) common, (2) medium, 
(3) good, (4) fine, (5) fancy; B, Fillers, (1) common, (2) medium, 

(3) good, (4) fine; C SmoTcers, (1) common, (2) medium, (3) good, 

(4) fine; D Cutters, (1) common, (2) medium, (3) good, and (4) fine. 

* See J. P. Killebrew, Tobacco Districts and Types, in Circular 18 
of Bureau of Statistics, Department of Agriculture. 

E' I 






Types, Districts, Output and Prices op Leap Tobacco 

Types and Districts 

Production in Pounds 
(000 omitted) 

Grower's Prices per Lb. 
on Dec. 1 (ct8.)t 







I. CiGAB Type: 

New Ejneland 





















































New York 

12 2 


7 5 

Ohio — Miami Valley . . . 


Georgia and Florida . . . 


II. Chewing, Smoking, 
Snuff and Export 

Burley district 

Dark di.stricts of Ken- 
tucky and Tennes- 
Paducah district .... 
Henderson or stem- 
ming district 

Upper Green River 


Upper Cumberland 

district •. . . . 

Clarksville & Hop- 
kinsville district . 
Virginia sim-cured dis- 



Virginia dark district, . 

Bright yellow district: 
Old Belt — Virginia 
and North Caro- 

18 5 

New Belt — North 

Carolina and 

South Carolina.. 

Maryland and Eastern 

^ Ohio Export 

Perique — Louisiana .... 










* U. S. Census returns. 

t U. S. Department of Agriculture Estimates. 

cigar binders, and fillers, Wisconsin being known as the binder 
state because 75 per cent, of its crop is used for that purpose. 
Eleven New England counties, particularly those of the 
Connecticut and Housatonic valleys, produce cigar wrappers, 
binders and fillers. A larger share of the New England leaf 
is used for wrappers and for that reason its value is usually 

Map X. — Leaf Tobacco DisTRicra 

Production Data as in Thirteenth U. S. Census 

1. Wisconsin Cigar Leaf. 

2. New York Cigar Leaf. 

3. Bright Yellow New Belt. 

4. Va. Sun Cured; Va. Dard; and Bright Yellow Old Belt, 

5. Clarksville and Hopkinsville Dark. 

6. Paducah Dark. 

7. Burley Leaf. 

^. 11 



i ' 






higher than that of the tobacco grown in other northern states. 
The tobacco grown in fourteen counties of the Miami Valley 
in Ohio as in the case of Pennsylvania is used mainly for cigar 
fillers. That grown in the eight counties which comprise the 
Onondago and Big Flats tobacco districts of New York is 
similar to the New England crop but is of somewhat inferior 
average quality and less of it is used for cigar wrappers. The 
highest type of domestic cigar tobacco is grown in the five 
tobacco counties of Georgia and Florida, it being used largely 
for cigar wrappers. 

Of far greater importance than the cigar leaf districts are 
the large districts in Kentucky, Virginia, North Carolina, 
Tennessee, South Carolina, Maryland, West Virginia and 
southern Ohio which produce the chewing, smoking, snuff, 
cigarette and export types. Their value per pound is on the 
whole less than that of the cigar types, but their total quan- 
tity and value are far in excess. Indeed Kentucky alone 
produces one-third of the country's entire leaf tobacco crop. 
The hurley district extends throughout the central and 
eastern parts of Kentucky and certain counties in Ohio, In- 
diana and West Virginia. It produces the so-called "hurley'' 
leaf, much of which is used in the United States to manufac- 
ture chewing and smoking tobacco and cigarettes and some of 
which is also exported to foreign markets. 

The principal dark districts of Kentucky and Tennessee 
which produce the various types of "dark" leaf are five in 
number. The leaf grown in the Paducah district of western 
Kentucky and Tennessee, instead of being air-cured as in the 
hurley and cigar leaf districts, is cured by the open-fire proc- 
ess. It is largely exported to foreign countries, although some 
of it is retained for the manufacture of snuff and cheap cigars, 
chewing and smoking tobacco. To the west and northwest 
from this district in Kentucky and Indiana is the Henderson 
district, also called the "stemming" district because most of 
its crop is exported to Great Britain in the form of "strips" 
which consist of the leaves after the stem or midrib has been 
taken out or "stemmed." The crop is cured either by the air- 
curing or open-fire processes and nearly all of it is shipped 




abroad. The better grades of dark tobacco grown in the upper 
Green River and Upper Cumberland districts of Kentucky, 
where the air-curing process prevails, are used for chewing 
tobacco, and the lower grades for smoking tobacco and for 
exportation. The output of the Clarksville and Hopkinsville 
district of Tennessee which is cured by the open-fire process, 
is prepared mainly for the export market, and as in the case 
of the Paducah district much is shipped to Great Britain in 
the form of strips. 

The crop of the ''sun cured" district of northern and cen- 
tral Virginia which is partly cured in the sun and partly air- 
cured, is used largely in the United States in the manufacture 
of chewing and smoking tobacco. That of the dark district of 
Virginia, located in the southern part of the state, on the 
contrary is cured with open wood fires, and most of it is ex- 
ported. Smaller quantities are used in the United States to 
make cheap cigars, snuff, smoking tobacco, plug fillers, and 
some of highest grades for plug wrappers. 

The hright yellow district divides itself into two belts. 
The "Old Belt" which includes various counties in the south- 
ern part of Virginia and the northern part of North Carolina, 
cures its crop by the flue-curing process. Some of it is ex- 
ported but most of it is retained for the manufacture of chew- 
ing and smoking tobacco. The crop of the "New Belt," which 
is located in the eastern and southern part of North Carolina 
and the northern part of South Carolina, is also cured by flue- 
curing process, but in this district the leaves are "primed," 
i e., gradually cut from the stalk in the field as they ripen. 
Some of the bright yellow tobacco of this belt is exported, but 
most of it is used in the domestic manufacture of cigarettes 
and smoking tobacco. 

In certain counties extending through Maryland, West 
Virginia, and eastern Ohio the so-called ''export tobacco'' is 
produced. This is a very ^lieavy shipping" tobacco which is 
cured either by the air-cured or open-fire methods, and most 
of it is exported to France, Holland and Germany. Small 
quantities are retained for cheap domestic cigars and smoking 


I' ' ' 

'! . i 



The total crop of perique tobacco is but small and has in 
recent years declined, nearly all of it being grown in St. 
James Parish, Louisiana. It is of a high quality, however, 
bringing prices as high as those paid for the cigar tobacco 
grown in Georgia and Florida, and is known for its distinc- 
tive qualities. After being air-cured, the leaves are stemmed, 
made into loose twists, packed into boxes and subjected to 
pressure. The twists are unrolled to permit absorption of 
juices, retwisted and recompressed many times until finally 
cured. Formerly it was sold in rolls or '^carrots" wrapped 
in cotton cloth and wound with rope and weighing from one 
to four pounds each, but more recently the crop has been 
packed into second-hand whiskey barrels each holding about 
^\Q hundred pounds. Perique carrots were long regarded as 
a form of currency accepted by local merchants in exchange 
for goods and in payment of debts.^ 

Methods of Selling Leaf Tobacco in the United States 

The methods of selling the crops of the cigar leaf districts 
differ from those prevailing throughout the southern states 
where the heavier types are mainly grown. 

Sale of Cigar Types. — There are no organized markets for 
cigar leaf tobacco, which is mainly grown in the northern 
states. Nearly all of it is sold by private sale to packers, 
dealers or cigar manufacturers. (1) The most common 
method is to sell privately to so-called "packers," whose agents 
sometimes purchase a grower's crop in the field before it is 
harvested but more frequently make bids at the tobacco barns. 
After the tobacco is cured the growers strip the leaves from 
the stalks, sort them into grades of quality, tie them in bun- 
dles of about forty pounds each, wrap them in heavy paper 
and deliver them to the packer's local warehouse or ship them 
to his headquarters which may be in New York, Chicago or 
other cities. The packer's services are various: (a) he acts 
as a local dealer who buys leaf tobacco from the growers; (b) 

* Killebrew and Myrick, p. 376, 



he regrades, ferments and packs it into cases of from 300 to 
350 pounds each; (c) he carries stock for many of the small 
local cigar manufacturers operating in the cigar leaf districts; 
(d) he sometimes sells to local manufacturers on credit, 
thereby acting as a banker, and (e) he sells much tobacco by 
sample to the wholesale dealers or jobbers and cigar manufac- 
turers located throughout the United States. 

(2) Cigar leaf is sometimes privately sold by the growers 
direct to manufacturers. The American Cigar Company, for 
example, has leaf -buying stations at Hartford and Windsor, 
Connecticut; Fulton, New York; Dayton, Ohio; Lancaster, 
Pennsylvania ; and Brodhead, Deerfield, Edgerton, Jonesville, 
Madison, Sparta, Stoughton, Viroqua and Watertown, Wis- 
consin ; and has plants at various places for the rehandling, 
packing and storage of cigar leaf tobacco.^ 

(3) Some cigar leaf is privately sold by the growers to 
the wholesale dealers or jobbers who may act as packers as 
well as jobbers. The jobber's supply of cigar leaf, however, 
is mainly obtained from the packing concerns. 

(4) Because of its nearness to the dark, hurley and export 
leaf districts, a portion of the cigar leaf of the Miami Valley 
in Ohio is publicly sold on the auction market at Cincinnati, 
but this is an exception to the usual methods of selling the 

cigar types. 

The system of middlemen is expensive, the original mar- 
ket value of the cigar leaf being advanced from 40 to 80 
per cent, by the time the crop reaches the manufacturers. 
It prevails largely because, in contrast with other branches of 
tobacco manufacturing, cigars are made by hundreds of small 
cigar makers who have insufficient capital to purchase direct 
from the farmers, send agents to organized markets, or do 
their own grading, fermenting, packing and storing. The 
growers are, however, not without redress as regards the 
prices which they receive. The very absence of control over 
the cigar-manufacturing industry by a few large concerns has 
assured a certain degree of co mpetition between cigar leaf 

*U. S. Bureau of Corporations; Tho Tobacco Industry, Part I, 
p. 297. 












buyers. The system of local cigar manufacture in small fac- 
tories and households such as prevails in the Pennsylvania 
district, moreover, enables the grower in case of low prices 
to undertake the making of cigars on his own account or for 
a local manufacturer. Growers may also if necessary pack 
their crop for storage or for shipment to markets located at a 
distance. Their main difficulty lies in the absence of definite 
knowledge as to current prices for cigar leaf, neither the 
buyers nor the individual growers being inclined to disclose 
the real price for which the crop changed hands. 

Sale af Smoking, Chewing, Snuff and Export leaf. 
— (1) In most of the southern tobacco districts a large part 
of the leaf tobacco crop is sold at auction in public tobacco 
warehouses. In contrast with the northern leaf tobacco dis- 
tricts, these public warehouses located at large markets such 
as Louisville, Cincinnati, Clarksville, Hopkinsville, Eichmond, 
Danville and Baltimore and at numerous smaller towns in the 
growing districts constitute an organized leaf tobacco market. 

The auction sales are conducted in two general ways : (a) 
by the 'loose-floor" method, and (b) by the "prized" or "in- 
spected leaf" method. The former is particularly important 
in the Virginia sun-cured, Virginia dark, and bright yellow 
districts, although it has also been established to some extent 
in the Clarksville and Hopkinsville and Paducah dark dis- 
tricts, and in the hurley tobacco districts. Auction sales of 
prized or inspected leaf tobacco prevail more largely in the 
large general tobacco markets at Louisville, Cincinnati and 
Baltimore where many types of leaf are sold, and in the 
Paducah, Henderson, Upper Green River and Upper Cum- 
berland dark districts, the hurley district and the Maryland 
and East Ohio export district, the latter shipping most of 
its prized tobacco for sale in Baltimore warehouses. Some 
prized tobacco is also sold at auction in Virginia and the 

Under the loose-floor method, the growers, after curing 
the leaves, stripping them from the stalk and tieing them 
into small bundles containing from five to twenty leaves — 
the size of the bundles differing in the various districts — or 



placing them in sheets without tieing them as is sometimes 
done in the "New Belt" of the bright yellow district haul 
them to the nearest auction warehouse. The warehouses 
are equipped with sufficient floor space and light to permit of 
the ready examination of the tobacco leaves, when placed m 
long piles on the floor, by the various buyers who congregate 
there Meanwhile in moving the tobacco from the farmer s 
wagons to the assigned floor space it is weighed and tagged 
with cards showing the warehouse number, weight of pUe 
and name of the owner. It is then "auctioned off to the 
highest bidder by a tobacco auctioneer, the owner, however, 
reserving the option of rejecting the bids and selling his crop 
privately or at a subsequent auction. The usual warehouse 
costs are a weighing charge of 10 to 15 cents per pile, an 
auction fee of 10 to 15 cents per 100 pounds, or a set fee of 
25 cents in case the pile exceeds 100 pounds in weight, and 
a commission of 2^ per cent, on the proceeds of the sale for 
the general service of the warehouseman.^ 

Under the prized or inspected leaf method, the tobacco is 
delivered to the warehouse by the grower in hogsheads hold- 
ing-variously in different districts— from 500 to 1,800 
pounds, or, as is sometimes done in the bright yellow districts, 
in so-called "tierces" holding from 250 to 600 pounds When 
so packed in hogsheads or tierces the tobacco is said to be 
"prized " Its sale at public auction is subjected to control by 
the states and by boards of trade or tobacco exchanges, so as 
to insure fair dealings between buyers and sellers. As is 
stated by Messrs. KiUebrew and Myrick in their standard work 
on Leaf Tobacco: 

It is the purpose of the law that these regulations will so 
cover every case as to make it unnecessary to carry disagree- 
ments to the courts. Provision is made that no warehouseman, 
or any one of his employees, is allowed to participate in the 
profits or losses from the purchase or sale of any tobacco m the 
warehouse with which he may be connected. The inspectors 
of tobacco are either appointed by some State authority, or 
elected by a tobacco board of trade. In Tennessee, the ware- 
» Killebrew and Myrick, pp. 274-275. 


I> ^ . 






housemen are created inspectors by law, but they may appoint 
inspectors, or samplers, for whose acts the warehousemen are 
held responsible by the regulations of the tobacco board of 
trade. These deputy inspectors are elected by the vote of the 
warehousemen and buyers, who have an equal voice in their 
selection. In cases where differences and claims arise, these 
are settled by an arbitration committee. The latter consists 
usually of three persons, who are appointed by a committee of 
the board of trade, one member of which is a warehouseman 
and another a buyer, these two selecting a third to complete 
this committee. Provision is also made for a committee of 
appeal, which has the power to confirm or reject the decision 
of the committee of arbitration. The warehouseman is obliged 
to keep his house in good condition and repair, the floors fitted 
with platforms, or skids, which will elevate the hogsheads at 
least four inches. 

Provision is also made for the penalizing and detection of 
false packing, the bonding of inspectors, and a lien on the 
tobacco to cover warehouse charges and fees. 

The auction sales of prized tobacco are based upon sam- 
ples which are drawn by official inspectors, the hogshead or 
tierce being opened, inverted and then lifted from the to- 
bacco. To obtain the samples the solid column of leaves which 
is thus exposed is divided at various places each of which is • 
known as a '"hreak/' and for this reason the auction sales 
are commonly referred to as tobacco 'breaks.'' To the sam- 
ples are attached and sealed labels or tags showing the name 
of the warehouse and its number, the name of the seller and 
inspector, the gross weight, date of inspection, and in case of 
reinspection also the date of reinspection and newly ascer- 
tained gross weight. The warehouse proprietor also issues 
a tobacco "note'' or manifest bearing the date of inspection 
or reinspection, old and new weights, name of warehouse, 
and growers' marks or numbers. This "note" is a negotiable 
receipt which changes hands whenever the tobacco is sold and 
requires delivery when finally presented for shipment. Should 
the owner desire to store his crop for sale at some future 
time a special storage receipt is issued by the warehouse- 



Samples are auctioned off to the highest bidder the bids 
usually being taken at advances of 10 cents per 100 pounds 
up to $6, after which 25 cents is the minimum advance up to 
$25, and then 50 cents per 100 pounds. The growers, as m 
the case of loose-floor sales, may reserve the option ot re- 
jecting any bid offered. 'Frequently as many as five hundred 
sales are made in a. morning, all of which must be cashed 
within a specified time. The grower receives his pay at the 
warehouse office at the price accepted less warehouse charges, 
which usually vary from 20 cents to $2.00 according to the 
quantity sold, inspection and sampling fees ranging from 40 
cents to one dollar per hogshead (including cooperage and 
nails) , auction fees ranging from 12i cents to 25 cents per sam- 
pie sold, a commissionman's fee of 2^ or 3 per cent and vary- 
ing storage and insurance charges if stored for a longer time 
than say four months. If shipped to the warehouse by rail 
the railroad charges are also deducted from the balance re- 
mitted to the grower. :,..•.• „ier. 
(2) Leaf tobacco in the southern tobacco districts is also 
sold in various ways by private sale, (a) Many growers sell 
the loose leaves as stripped from the stalks at their barns, for 
delivery to buyers' prizing houses, (b) They sometimes sell 
loose leaf tobacco privately at the public warehouses, (c) 
They may sell prized tobacco at their barns, or (d) privately 
at the public warehouses, and (e) some leaf tobacco, also, 
particularly in the Clarksville and Hopkinsville districts, is 
prized for the farmers by hired prizers, and is stored m pri- 
vate warehouses, to be finally sold by private salesmen on the 

basis of samples. , 

Southern Leaf Tobacco Markets.-The markets m which 
the southern growers sell their leaf tobacco crops and m 
which much leaf tobacco is also resold by dealers and other 
middlemen are too numerous for complete enumeration. 
Many of them serve but small parts of a tobacco district, but 
nevertheless are of importance alike to growers and buyers. 
Among the largest markets, however, are Louisville, Hender- 
son, Paducah, Owensboro, Hopkinsville, Lexington and May- 
field in Kentucky; Cincinnati, Ohio; Clarksville, Sprmg- 






field, Fashville, and Paris in Tennessee; ,St. Louis, Mis- 
souri ; Eichmond, Danville, Petersburg, Lynchburg and 
Farmvile in Virginia; Durham, Winston-Salem, Wilson, 

Maryland""" ''' ^""^^ *^*'°^"^' ^"^ Baltimore; 

Southern leaf Buyers.-Owing to the large degree of con- 
solidation in those branches of tobacco manufacturing which 
consume the various heavy types of leaf grown in the South, 
the number of buyers bidding for crops is smaller than it 
was in the eighties and early nineties. Various groups of 
buyers, however, congregate regularly at the southern mar- 
Many of the buyers represent manufacturers of chewing 
smoking, snuff, cigarette, stogie, and cheap cigars. The 
arger manufacturing concerns, particularly, maintain special 
leaf-purchasing departments with headquarters at the leading 
marke s and branches and buyers throughout the surrounding 
districts. Some of the buyers represent dealers who prize 
remade, rehandle, resell and ship tobacco to manufacturers 
and exporters, or specialize in loaf tobacco strips which are 
ultimately shipped to the English market. The dealers may 
sell their supply either privately or on the large public auc- 
tion markets. 

At many leaf markets, especially those which handle the 
export, dark and hurley types, the agents of exporting con- 
cerns are important buyers. Exporting of leaf tobacco is 
conducted by two principal groups of concerns . ( 1 ) Private ex- 
porting companies ship to Great Britain and smaller quanti- 
ties to Germany, Holland, Belgium, Denmark, Norway, Swe- 
den Africa Australasia, Japan and the foreign countries of 
North and South America. The Imperial Tobacco Company, 
for example, buys and exports great quantities of American 
tobacco to Great Britain, and the British-American Tobacco 
Company to o her foreign countries. (2) So-called govern- 
ment regies have buyers in the United States and ship leaf 
tobacco to France, Italy, Austria and Spain. They represent 
the government monopolies which control the tobacco trade 
in those countries. 





Leaf Tobacco Exports.— The exports of unmaimfactured 
tobacco just referred to have since the close of the nineteenth 
century comprised from 288- to 380,000,000 pounds annually 
or over one-third of the country's annual crop. So important 
are they that one of the general types of leaf is expressly 
known as export tobacco, and in addition much Kentucky and 
Tennessee dark, hurley, Virginia dark and bright yellow to- 
bacco is shipped abroad. The principal foreign markets, in 
their usual order of importance, are the United Kingdom, 
Germany, Italy, France, Holland, Canada, Spain, Belgium, 
Australia, Africa and Japan. 

Leaf Tobacco Imports.— Though the largest producer and 
exporter of leaf tobacco in the world, the United States never- 
theless imports each year from 25- to 55,000,000 pounds of 
foreign leaf. The imports consist mainly of cigar fillers, 
binders and wrappers from Cuba, cigar wrappers from Su- 
matra, and cigarette leaf from Turkey. They comprise to- 
bacco types which are not grown in the United States or are 
not produced in sufficient quantities to meet domestic needs. 
Some of the foreign leaf is imported directly by American 
manufacturers, the largest of which maintain foreign buying 
agencies; some is imported by importing dealers, and still 
other is shipped to the United States from foreign plantations 
owned and operated by large American tobacco manufac- 

Leaf Tobacco Prices 

Although in general the prices paid to the growers of 
leaf tobacco in the United States vary from year to year 
according to the commercial supply and demand, these forces 
have not always operated with exactness. In the domestic 
cigar leaf trade where there are no organized public markets 
and each sale is the re sult of private — often secret — bargain- 

* Bureau of Corporations: The Tobacco Industry, Part I, pp. 255, 





ing, the grower has no definite price index as a basis for in- 
telligent judgment. The growers of the leaf tobacco used for 
other purposes than cigar manufacture have the advantage of 
numerous organized auction markets where prices are pub- 
licly quoted. There is no single or small group of southern 
tobacco markets, however, which stands out as prominently as 
Chicago does in the grain and livestock trades ; New Orleans, 
New York and Liverpool in the cotton trade ; or Boston in 
the wool trade. The organization of the American Tobacco 
Company and its subsidiary manufacturing and exporting 
companies has moreover at times restricted the freedom of 
competition to some extent, for it naturally reduced the num- 
ber of independent buyers. The decline in prices during the 
years 1899 to 1903 was doubtless due in part to the great in- 
crease in the' crop during those years, but among the growers 
there was a widespread feeling that it was largely due to the 
dommant position of the tobacco combination. They there- 
upon formed growers' associations in the various districts,^ 
the members of which refused to sell their crop at the prevail- 
ing prices, and restricted production. Much leaf tobacco was 
stored in warehouses and became the basis for advances made 
by New York as well as local banks. The total annual crop 
declined from 816- to 660,000,000 pounds between the years 
1903 and 1904 and did not again reach the level of the former 
year until 1909. The effect of this was to gradually raise 
the average grower's price from 6.8 cents per pound on De- 
cember 1, 1903, to 10.3 cents on December 1, 1908.^ 

The price effect of supply is exerted largely by domestic 
leaf, the leaf imports from abroad being mainly non-com- 
petitive. Foreign wrapper tobacco and other foreign leaf 
tobacco when mixed or packed with more than 15 per cent, 
of wrapper tobacco is obliged to pay an import duty of $1 85 
per pound if unstemmed and $2.50 per pound if stemmed, 
^ Dark Tobacco Growers ' Association of Kentucky ; Dark Tobacco 
Growers Association of Tennessee; Burley Tobacco Growers^ Asso- 
ciation of Kentucky; Maryland Tobacco Growers' Association; Mu- 
tual Protective Association of Bright Tobacco Growers of Virginia, 
JNortn Carolina, etc. ° ^ 

^Estimates of U. S. Department of Agriculture. 



and the lowest duties on foreign filler and other classes of leaf 
tobacco range from 35 to 50 cents per pound.^ The influ- 
ence of demand, on the contrary, is international, over one- 
third of the crop being annually exported. 

Leaf tobacco prices, more so than those of most other 
farm staples, also vary greatly according to quality and use. 
As was shown in Table No. 1 the average prices of cigar leaf 
exceed those of tobacco used for other purposes. Cigar wrap- 
pers, moreover, sell at higher prices than binders, and binders 
higher than fillers. So, likewise, the bright yellow types 
usually sell for higher prices than burley leaf, and burley 
leaf higher than the dark and export types. While much wool, 
livestock, cotton, and to some extent even grain, is not graded 
until after it is sold by the farmers, the tobacco growers 
themselves usually grade their crop before selling it. 

Local hauling, sJiipping and marleting costs affect leaf 
tobacco prices and grower's profits in the same manner that 
similar costs influence the tobacco prices or grower's profits 
of other farm products. Leaf tobacco being an intrinsically 
valuable commodity, however, the aggregate influence of haul- 
ing and shipping costs is relatively smaller than in the case 
of commodities such as grain, hay or potatoes. The United 
States Department of Agriculture reports the average costs 
of hauling from the farms to local markets or shipping points 
to be about 10 cents per 100 pounds, and when shipped to 
the larger markets by rail the freight charges from the local 
shipping points usually do not exceed 15 or 25 cents per 100 
pounds. Marketing costs including commissions, warehouse 
charges and other costs previously mentioned are, on the 
contrary, a relatively important item in leaf tobacco prices 
or growers' profits.^ When the leaf tobacco is sold in hogs- 
heads, tierces or other containers the cost of such containers 
becomes an additional item, and frequently the costs incurred 
in the packing house which stands between the grower and 
manufacturer in so many instances affect either the price re- 

» Tariff Act of Oct. 3, 1913, Schedule F. ^ ^ 

'For cost comparisons see United States Industrial Commission; 
Distribution and Marketing of Farm Products, vol. vi, pp. 310-319. 


i r 

t t i 





ceived by the grower or that paid by the manufacturer. The 
commercial costs are lowest when the manufacturer purchases 
directly from the grower, and highest when the crop is mar- 
keted through packers, wholesale dealers, or jobbers, exporters 
or other middlemen, each of whom incurs costs and demands 
a profit for the services which he renders. 

The manner in which grower's production costs affect leaf 
tobacco prices and grower's profits does not differ essentially 
from the effect of such costs in other agricultural trades, and 
the influence of general factors such as gold production is 
described in Chapter XVII. 


Jacobstein, M. The Tobacco Industry (1907). 
KiLLEBREW, J. B., and Myrick, H. Tobacco Leaf (1906). 
Kn^LEBREW, J. P. Tobacco Districts and Types, in Circular 18 

of Bureau of Statistics, Department of Agriculture 

Tobacco Report (July 1, 1912), Circular 38 of Bureau of 

Statistics, Department of Agriculture (1912). 
United States Bureau of Corporations: The Tobacco Indus- 
try (1909), Part I, chap. 1, 11-14. 
United States Bureau of Foreign and Domestic Commerce: 

Annual Commerce and Navigation Report (annual). 
United States Bureau of Statistics : Production and Value of 

Tobacco Crop, 1910-1913, Farmers' Bulletin No. 570 

(Dec. 27, 1913), pp. 9-11. 

Tobacco Crop of the U. S., 1612-1911, Circular 33 (191^. 

United States Industrial Commission: Distribution of Farm 

Products (1901), Vol. 6, Part 8. 

t ^ 


The fruit trade of the United States comprises so many 
varieties of fruit, and so many growing districts, markets and 
branches of activity that space forbids the discussion of many 
phases of this trade. Viewed from the standpoint of the 
organization of commerce, it will be necessary to describe 
only the distinguishing features of the fruit trade, chief 
among which are the methods of marketing the crop and the 
unusual amount of cooperation which has been developed 
among fruit growers. Much of the ensuing discussion applies 
equally as well to the trade in vegetables and other farm 
produce, but for purposes of brevity it will be confined to the 
fruit trade. 

The Fruit-Grov7ing Districts 

The fruit crop is commonly divided into five primary 
classes or groups: (1) orchard fruits, (2) small fruits, (3) 
grapes, (4) citrus fruits and (5) non-citrus tropical and sub- 
tropical fruits. Of each there is a large number of varieties, 
and most of them are produced in widely separated growing 


Orcliard Fruits.— By far the largest group of American 
fruits consists of the so-called orchard fruits— apples^ peaches 
and nectarines, pears, plums and prunes, cherries, apricots, 
quinces and others of less importance. As indicated in Map 
No. XI these fruits taken as a whole are grown in many 
parts of the country. So generally are they produced that 
the census returns of 1909 showed the amazing total of 214,- 
600,000 bushels. In California, New York, Michigan, Penn- 
sylvania, Missouri, Kentucky, Iowa, Ohio, Virginia, Tennes- 





see, North Carolina, Illinois, Indiana, West Virginia, Colo- 
rado, Arkansas, and Oregon many growers make a special 
business of raising orchard fruits. 

The orchards yielding the 140- to over 175,000,000 bushels 
of apples annually grown in the United States are widely scat- 
tered, but three chief belts are discernible: (a) The old-time 
"apple belt'' which has for many years produced heavy apple 
crops extends throughout New York, New England, Pennsyl- 
vania, Ohio, Indiana, Kentucky, Tennessee, Michigan and the 
Virginias, (b) The apple orchards of trans-Mississippi Val- 
ley belt, including chiefly the Ozark territory of southern 
Missouri and northern Arkansas, southwestern Iowa, eastern 
Nebraska and Kansas, are newer but now yield heavy crops, 
(c) Still more recently the apple orchards of the Pacific 
Coast — California, Oregon and Washington — have shipped 
many carloads to eastern and middle-western markets ; indeed 
few apples have been more widely advertised than those of the 
Hood River Valley of Oregon. A fourth apple district is 
gradually being developed in the Rocky Mountain states, 
Colorado, Idaho, Utah and Montana already shipping appre- 
ciable, quantities to outside markets. 

Peach growing is somewhat less general, but is likewise 
spreading over a greater area than in the past. For many 
years the commercial crop reaching the great fruit markets 
of the Middle West and East came largely from three dis- 
tricts, Georgia, Michigan, and California, but it is noticeable 
that many peaches have in recent years entered the trade from 
the orchards of Indiana, Illinois, New York, Ohio, Washing- 
ton, Colorado, Utah, Arkansas, Missouri, Texas and from all 
the states south of the Ohio and Potomac rivers.^ 

Small Fruits.— The country's total output of so-called 
small fruits comprised 426,500,000 quarts in the census year 
1909. They include strawberries, blackberries, raspberries, 

* Other orchard fruits are grown chiefly as follows : pears in Cal., 
N. Y., Mich., N. J., Pa., Ohio, Md., Ore. and Wash. ; plums and prunes 
in Cal., Oregon, Wash., N. Y., Pa. and Mo. ; cherries in Cal., Pa., Ind., 
Mich., Ohio, Ore., Neb., Mo., 111., Iowa and Wash.; apricots in Cal.; 
quinces in N. Y., Ohio, Pa. and CaL 


































cranberries, currants, gooseberries and other varieties of ber- 
ries. Their production is widely scattered, but the leading 
districts are in New Jersey, New York, Massachusetts, Michi- 
gan, California, Maryland, Ohio, Missouri, Pennsylvania, 
Delaware, Tennessee and Washington. 

Grapes.— In contrast with the output of orchard fruits 
which increased but slowly during the census decade 1899 to 
1909, and that of small fruits, which declined somewhat, the 
country's grape crop advanced from 1,301,- to 2,571,000,000 
pounds. California's output of 1,980,000,000 pounds in 1909 
exceeded the grape crop of the entire United States of ten 
years earlier, and in the same year 253,000,000 pounds were 
grown in New York. Though vineyards are not uncommon in 
eastern states such as Pennsylvania, New Jersey, Delaware, 
Maryland, Virginia, and North Carolina; and in Illinois, In- 
diana, Missouri and Iowa, ninety-three per cent, of the total 
commercial crop is grown in but four regions: (1) Califor- 
nia, (2) western New York, (3) southwestern Michigan, and 
(4) northern Ohio. The use of grapes for the making of 
grape juice and raisins, the irrigation of large areas in 
California and the development of large eastern markets for 
fresh grapes have nearly doubled the crop during the last 

Citrus Fruits.— The fruits known as "citrus" to distin- 
guish them from "deciduous" fruits, include principally or- 
anges, lemons and grapefruit.^ Their production in the 
United States is confined very largely to California and Flor- 
ida, and during the decade 1899 to 1909 the annual crop 
advanced from 7- to 23,500,000 boxes.^ 

Non-citrous Tropical and Sub-tropical Fruits.— Though 
the citrus fruits constitute the main group of tropical and 
sub-tropical fruits grown in the United States, various non- 
citrus fruits of that type are grown. Figs a nd olives are 

* Most of the orchard fruits are deciduous and are so-called be- 
cause the trees producing them shed their leaves each season. 

' 1909: Domestic orange crop— total 19,487,481 boxes: California 
14,456,180, and Florida 4,852,967. Lemon crop— total 2 770 313 
boxes: California 2,756,221, and Florida 12,367. Grape fruit— total 
1,189,250 boxes: California 122,515, and Florida 1,061,000 



grown mainly in California ; pineapples, mangoes and bana- 
nas in Florida ; guavas and persimmons in Florida and Cali- 
fornia. Small quantities of loquates, pomegranates and dates 
are also included in this group of fruits. 

Importation of Fruits 

In addition to the great quantities of domestic fruits 
grown in the United States, foreign fruits and nuts to the 
value of from $27,- to $41,500,000 are annually imported 
from abroad, and smaller quantities from the country's island 
possessions. The imported fruits consist mostly of tropical 
and sub-tropical varieties not grown on a sufficiently large 
scale in the United States. The largest item in the foreign 
trade consists of bananas imported from Central America, 
the West Indies and Colombia. Sixty per cent, or more are 
imported by the United Fruit Company, a large commercial 
concern which cultivates nearly 222,000 acres of fruit lands 
in the tropics and buys additional fruit from other growers ; 
which operates over eighty vessels to carry fruit for its own 
account, general freight for the public, and many passengers ; 
and which operates ice plants, hotels and hospitals, and in 
many ways is a prime factor in the commerce of the West 
India and Caribbean countries.^ The bananas and other 
fruits which it imports are mostly sold on the large auction 
markets of the Atlantic and Gulf ports of the United States 
and thence distributed throughout the country. Other foreign 
fruits include currants imported mainly from Greece, Asiatic 
Turkey and Italy; dates and figs from Asiatic Turkey and 
other countries in Asia; grapes from Spain; lemons from 
. Italy ; olives from Spain and Greece ; oranges from the West 
* Indies, Italy, Mexico, Japan and England ; pineapples from 
Cuba; and raisins and other dried grapes from Asiatic Tur- 
key and Spain. 

* Proceedings of House Committee on the Merchant Marine and 
Fisheries in the Investigation of Shipping Combinations (1912), vol. 
i, pp. 711-731. 





. t. 

I Wi 


Preparation for Market 

Fruit Grading.— As in the case of other farm products 
fruit must be graded in order to be properly marketed. The 
grading requires careful sorting of the fruit with three chief 
factors in mind: (1) uniformity, (2) relative freedom from 
injury resulting from handling, picking, storm, disease, in- 
sects or otherwise, and (3) agreement with the brand marks 
on the fruit package. Uniformity, the principal grading as 
well as selling consideration, refers mainly to size, color, and 
shape, which together represent appearance. It is a well- 
known market axiom that an apple of good appearance al- 
though of relatively inferior taste and quality is more easily 
sold in the large wholesale markets than one of superior taste 
and quality but inferior appearance. 

Fruit is sometimes regraded and repacked at the whole- 
sale markets by dealers or commissionmen, but as in the case 
of leaf tobacco it is usually graded locally. It may be graded 
either by the local dealers who buy much fruit from the 
growers, or by the growers before they dispose of their crop. 
In the latter case it may be graded by the individual growers 
or by growers' cooperative associations, the tendency in many 
fruit districts being toward direct action by such associations 
or by the individual growers subject to association rules and 

Though the formation of cooperative growers' associations 
leads to a degree of uniformity within given fruit districts, 
throughout the country as a whole there is great lack of uni- 
formity in fruit grading. Many apple shippers for example 
sort their crop into three grades— selects, firsts and culls; 
but others grade them into four groups— selects, firsts, sec- 
onds and culls. Moreover, throughout the country as a whole 
there has been no general understanding as to the exact mean- 
ing of the various grades of fruit. More has in this respect 
been done in the grading of apples than that of other fruits, 
for the National Apple Shippers' Association has since 1900 
endeavored to enforce upon its members two "standard' 




grades (Nos. 1 and 2), and in 1912 Congress enacted a stat- 
ute, effective July 1, 1913, fixing three "standard" grades for 
apples shipped in interstate commerce. All of the standard 
grades comprise well-grown, hand-picked apples of normal 
shape, of one variety and practically free from defects, the 
total in a barrel being not more than 10 per cent, below the 
specifications of the law,^ and other apples may not be shipped 
under standard grades. The difference between the three 
standard grades lies mainly in the size of the apples. No. 1 
having a minimum diameter of 2^ inches. No. 2 not less than 
2i and No. 3 not less than 2 inches. 

Fruit Packing.— The grading of fruit is inseparably con- 
nected with its packing. One of the abuses of the trade has 
been the occasional false packing of fruit by placing different 
grades in the same package, attaching misleading brands or 
marks, using undersized packages or failing to properly fill 
the packages. There has also been, and to some extent still 
is, lack of uniformity in the kind and capacity of fruit pack- 
ages used. 

Much improvement has been made in the matter of pack- 
ing by the voluntary action of growers, growers' associations, 
and dealers. Fruit shipped from given districts is now com- 
monly packed in standard packages, there being standard ap- 
ple barrels and boxes, berry boxes and crates, grape baskets, 
Georgia, Michigan and Delaware peach baskets, etc.^ Stat- 
utes have been enacted in many states, prescribing the mini- 
mum dimension of the packages, and penalizing underfilling 
and misbranding. The federal apple grading law of 1912, 
likewise, prescribes the standard dimensions of an apple bar- 
rel, requires branding according to the actual grade of the 
contents and penalizes misbranding.^ 

The packages of fruit which are honestly^ graded and 
packed and of superi or quality, are usually marked with the 

*Act of Aug. 3, 1912. 

»r. A. Waugh: Fruit Harvesting, Storing and Marketing, pp. 


'Standard dimensions: length of stave 28^ inches; diameter of 

head 17S inches; distance between 26 in.; circumference of bulge 64 
in. (outside) ; cubical contents 7,056 cubic inches. 

t '!» 





I' *> 

trademarks or brands of individual growers or shippers or of 
growers' associations. Many such marks are well known in 
the large wholesale markets and constitute valuable trade 

Pre-cooling.— Perishable fruit destined to distant markets 
is frequently pre-cooled, i. e., it is cooled before shipment so 
as to reduce the cost of refrigeration and the cost of decay 
en route, cause the fruit to arrive in better condition, and per- 
mit it to ripen to a greater degree before being picked. The 
Interstate Commerce Commission has decided that pre-cooling 
may be done either by the railroad or the shippers and that 
when done by the former the maximum charge for pre-cooling 
must not be unreasonable.^ 

Shipping Fkuit to Market 

Although some fruit may in the future be shipped in 
refrigeration vessels from the Pacific Coast to eastern markets 
through the Panama Canal, fresh fruit transportation has 
thus far been largely a rail movement, for the perishable 
fruits, especially, require rapid shipment so as to avoid decay 
en route. 

Refrigeration Car Service.— The rapidity of movement as 
well as the required temperature for shipping perishable fruits 
is provided by the refrigeration car service of the rail carriers. 
Some of the refrigeration cars are owned by the carriers and 
others by private car companies, who receive from J to 1 cent 
per mile from the railroads for the use of their cars. The 
icing of the cars is likewise performed in some instances by 
the railroads and in others by the private car companies. In 
either event the railroad company, in addition to the regular 
freight rate, collects an icing charge from the shipper, which 
it retains or turns over to the private car company according 
to whether the one or the other performs the refrigeration 

As stated above the fru it may be pre-cooled before ship- 

. ^23 I. C. C. Rep. 267 (Apr. 8, 1912)— $7.50 fixed as reasonable 
railroad pre-caohng charge. Appealed to courts. 



ment, but if shipped long distances the cars must be re-iced 
en route. In order to expedite the service icing stations are 
therefore erected at various points on the rail lines, agents 
are placed in charge, many cars are concentrated and ''parked" 
in the growing districts shortly before the shipping season 
begins so as to be available when required, and the loaded cars 
are rushed to market as rapidly as possible, frequently in spe- 
cial trains. It is a common practice to ship fruit eastward 
or northward from the growing districts without knowledge as 
to its final destination, the cars being held at certain transfer 
and reconsignment points for final shipping orders. It is 
highly important that markets should not be overstocked, and 
the shippers, distributors, or growers' exchanges therefore 
prefer to keep the cars which are traveling across the country 
under their control until they ascertain existing market condi- 

Owing to the nature of the service rendered and the great 
distances between many of the growing sections and markets, 
the transportation of fruit is expensive and usually affects 
seriously either the prices received or the growers' profits. 
The railroad freight rates on peaches shipped to Philadelphia 
from Sacramento, California, are $299, and from Atlanta, 
Georgia, $171 per carload of 26,000 and 22,500 pounds re- 
spectively, and the refrigeration charges to Philadelphia from 
the same points are usually about $82^ and $59 respec- 

The direct and important connection between the refrig- 
eration car service and the fresh fruit trade, the relation be- 
tween the railroads and the private refrigeration car compa- 
nies, the uses and past abuses of these companies, and the 
present control of the icing charges by the Interstate Com- 
merce Commission, have been fully discussed elsewhere.^ 

Fruit Markets.— There are two quite distinct classes of 
fruit markets in the United States: the "direct, special, or 
retail market," and "the indirect, general, or wholesale mar- 

* $87.50 if iced during loading. 
*See E. E. Johnson and G. G. Huebner: 
Bates, voL i, chap. xii. 

Bailroad Traffic and 






I ! 

ket/'i These markets differ in many respects: (1) Special 
markets are local in character and are located everywhere 
throughout the country, especially in cities situated near the 
fruit orchards. General or wholesale fruit markets on the con- 
trary are located chiefly in the great cities and centers of 
population, and receive fruit not only from nearby growers 
but from distant parts of the United States and foreign coun- 
tries. (2) Competition in the special markets is local while 
in the general markets it is national and world-wide. (3) 
The special and general fruit markets differ also in that the 
former handle fruit in small quantities, while the latter 
handle it in carload and vessel load lots. (4) The profits per 
bushel, quart or package in the special markets are usually 
large as compared with those in the general markets. (5) 
In the former the growers usually sell either directly to con- 
sumers or to retail stores, while in the latter they usually sell to 
middlemen and seldom direct to consumers. (6) The former 
accept an almost unlimited number of varieties, while the 
latter confine themselves largely to a smaller number of 
standard, well-known varieties. (7) In contrast with the 
special markets which pay as much attention to quality as to 
appearance, the general markets rely more largely upon the 
appearance of the fruit. (8) The growers with a special mar- 
ket can largely disregard shipping quality, while those ship- 
ping to the general markets must so far as possible select va- 
rieties which will bear shipment and rough handling. (9) 
"The wholesale market requires a standard package, while 
almost any neat, clean package may be used in the direct 
market, and sometimes fruit is delivered in bulk from sacks, 
boxes, barrels or baskets, without any package. In the whole- 
sale market a gift package is practically always required, 
while the man who has private customers frequently has his 
boxes or baskets returned to him." ^ (lO) In contrast with 
the special or private markets which frequently pay large 
prices for fruit out of season, the general markets are usually 
available only for fruits in season. 

* F. A. Waugh, pp. 4-8. 
'/feirf., p. 6. 



Although particular growers and small crop-growing dis- 
tricts often ship their entire crop to the same wholesale market 
year after year, fruit is more commonly distributed in strict 
accord with market conditions. Thus California fruit has the 
advantage in nearby western markets, but thousands of car- 
loads are shipped to the large cities of the trans-Mississippi 
Valley, to Chicago, St. Louis, Milwaukee and all the large 
cities of the Middle West, and to New York, Boston, Phila- 
delphia, Baltimore, Washington, Pittsburgh, Buffalo and 
other eastern markets. Each large district supplies the near- 
by markets during its fruit season, but usually ships to many 
other markets throughout the country. The growers of the 
Atlantic seaboard, however, ship relatively little fruit west- 
ward because they are located near the huge eastern whole- 
sale and retail markets which readily accept enormous quan- 
tities of fruit. 

Fruit Exports. — Some American fruit is exported to for- 
eign markets. Appreciable quantities of dried apples are 
shipped to Germany and Holland; green and ripe apples to 
Great Britain, Canada and Germany; dried apricots to Great 
Britain, Germany, France, Holland and Belgium ; oranges to 
Canada; prunes to Germany, Holland, France, Canada and 
Great Britain; raisins to Canada, New Zealand and Great 
Britain ; and canned fruits of various kinds to Great Britain 
and Canada, and smaller quantities to numerous other foreign 
countries. The total value of all the fruits and nuts annually 
exported from the United States ranges from $15,- to $24,- 


Fruit Wajehouses.— Cold storage warehouses in which 
fruit may be stored have been erected both at some of the 
points of shipment and at the large wholesale markets. The 
former, many of which are operated by cooperative growers' 
associations, are mainly used for packing and pre-cooling fruit 
for shipment, the total amount of fruit stored in them for 
sale in the future, except at a few points, being relatively 
small. The large cold storage warehouses at the central mar- 
kets are operated by private warehousemen and railroads, and 
Hre used for the storage of many kinds of commodities. They 

I I,. 

) \ 

i I 




act as great reservoirs which equalize the supply of fruit 
throughout the year, especially between harvesting seasons. 
The warehousemen act as trustees for jobbers, commission- 
men, growers, or any of the marketing agencies mentioned 
below; they frequently finance the operations and sometimes 
invest in the corporations of their clients; and many of them 
deal in fruit jointly with their clients or entirely on their 
own account.^ 

Methods of Marketing Fruit 

Distribution in Wholesale Maxkets.— The sale of fruit in 
the special or retail markets by growers to consumers or retail 
concerns is a direct sale which requires no detailed descrip- 
tion. The great fruit-growing districts, however, are largely 
dependent upon the large wholesale markets where they dis- 
pose of their crop in many different ways. In speaking of 
the sale of fruit by growers it is of course understood that 
they may act either individually or jointly through a coopera- 
tive association or exchange. 

1. Many fruit growers sell their fruit to local dealers 
under any one of various kinds of contracts.^ They may sell 
the orchard as a whole, the dealers agreeing to accept the fruit 
on the trees, pay a lump sum for the crop, and perform the 
necessary picking, sorting, grading, packing and hauling. 
They may sell their fruit "on the table" in which case the 
growers do the picking and hauling while the dealers furnish 
the packages, perform the sorting, grading and packing, and 
pay an agreed amount per barrel, box or other unit. The 
growers may sell "f.o.b. loading station," i. e., they may re- 
ceive so much per barrel, box, etc., delivered at the shipping 
station, all intermediate work being done by them. They 
may also sell their crop for delivery at the dealer's packing 
warehouse, at so much per barrel or other measure, the dealer 
preferring to prepare the fr uit for final shipment to the whole- 

* See G. H. Powell : Cooperation in Agriculture, pp. 203-204. 
*8ee Report of Secretary of Missouri State Board of Horticul- 
ture (1912), pp. 19-20. 



sale markets. Local dealers in turn sell the fruit directly to 
wholesale jobbers, distributors, or in some cases to retailers, 
and indirectly through commissionmen and auction compa- 


2. Fruit growers may sell to so-called "fruit distribu- 
tors," or "marketing corporations." These concerns which 
may be located either in the growing districts or at the whole- 
sale markets usually act as brokers. They usually sell direct 
to wholesale jobbers for cash f .o.b. or subject to inspection on 
arrival, through auction companies, or in any other manner, 
and receive a brokerage charge of from 5 to 10 per cent, on 
the gross sales. Some of them also buy fruit from the growers 
on their own account, thereby acting as dealers. One of the 
largest distributing concerns is the "California Fruit Distribu- 
tors" which handles about 75 per cent, of the entire decidu- 
ous fruit shipments of California.^ 

3. Much fruit is sold by the growers direct to wholesale 
jobbers. These concerns obtain their supply in many different 
ways, for in addition to the fruit purchased from the growers 
by mail orders or traveling solicitors, they buy through com- 
missionmen and auction companies or from local dealers and 
distributing concerns and local dealers sometimes act as 
brokers for them. The wholesale jobbers in turn sell 
most of their supply to retail grocery stores, retail fruit 
stores and stands, fruit vendors and hucksters, and gen- 
erally to the retail trade. They also place much fruit in 
storage, gradually disposing of it as the retailers find a 


4. Much fruit is sold by growers and local buyers through 
central commissionmen. Indeed, the fruit trade was for many 
years closely dependent upon the commission houses, and al- 
though the tendency is to reduce the number of middlemen 
the commission house continues to be an important link in 
the fruit marketing machinery. The practice of many local 
shippers is to consign their fruit to the commissionmen who 

»F. B. McKevitt: Marketing of Fruit by California Fruit Dis- 
tributors, Proceedings of 38th Fruit Growers* Convention of Cali- 
fomia (1910), pp. 53-60. 



sell it direct to retail stores, vendors, hotels and other retail 
establishments, and if necessary to wholesale jobbers, or 
through auction companies. They receive from 5 to 10 per 
cent, on the gross sales as a commission for their services, and 
after deducting freight, refrigeration, drayage and any other 
shipping costs which may have been incurred, remit the bal- 
ance to the local shipper. Some commissionmen taking ad- 
vantage of the distance which separates them from the local 
shippers, have at times stooped to dishonest practices, and 
although the dishonest concerns doubtless are the exception 
to the general rule, the resulting distrust has done much to 
encourage the rise of jobbing houses, auction houses, growers* 
cooperative exchanges and other more direct means of market- 

5. Some fruit is sold by growers and other local shippers 
through fruit brokers, who differ from the commissionmen 
chiefly in that they usually sell to the wholesale trade. They 
usually solicit orders from wholesale jobbers and then se- 
cure the required amount of fruit from growers or local 
buyers, receiving a brokerage fee of from 3 to 5 per cent, 
on the gross sales, or of agreed amounts per barrel, box 
or other package. Some of them also act as jobbers, 
speculating in the fruit which they handle; and they en- 
deavor at times to distribute the surplus stock of the large 
markets among the smaller markets of the surrounding com- 

6. Auction companies have been formed at many large 
markets and at some local shipping points for the public sale 
of fruit and produce to the highest bidder. Like the com- 
mission concerns the auction companies accept consignments 
of fruit from growers, local dealers or others, but they differ 
in that while the former sell privately to a relatively small 
number of buyers, the auction concerns sell to a large num- 
ber at public sales, receiving from | to 5 per cent, on the gross 
sales for their services. The stockholders of the auction com- 
panies in some instances are the jobbers and other members 
of the trade, a nd some of them have not provided the open 

*G. H. PoweU, p. 200. 



and unrestricted markets which the auction system usually 
provides. "The auction company may also be a dealer in the 
products which it sells for its patrons. It may be engaged, 
either directly or indirectly, in financing its clients, in han- 
dling the products on joint account with its patrons, or in 
the purchase of products to be sold in competition with those 
of its clients." ^ 

7. Though the bulk of the country's fruit sold in the 
large wholesale markets is handled through the various agen- 
cies mentioned above, some of it is sold in these markets 
directly by the growers. In well-organized fruit-growing re- 
gions the growers sometimes form cooperative selling ex- 
changes, such as the California (Citrus) Fruit Growers' Ex- 
change, which have salesmen at the large markets who keep 
the growers advised as to the state of the market and sell their 
fruit to wholesale or retail buyers or through auction com- 
panies, thus dispensing with the commissionmen and brokers 
and sometimes with the jobber and auction companies. In 
the great eastern and middle-western fruit markets the efforts 
of these salesmen do not extend beyond the wholesale and re- 
tail buyers. In cities near the growing districts, however, 
some of the cooperative associations, when possible, sell direct 

to consumers. 

Some individual growers also sell their fruit to retailers 
without the medium of commissionmen, jobber or other mid- 
dleman. Those located near a large market can in many in- 
stances readily sell some of their crop in this way, but it is 
at times done also by growers located at a distance. They may 
sell freely to all bidders or under exclusive contracts, they 
may sell it f.o.b. at point of shipment, for delivery at des- 
tination, or for delivery at retailer's premises ; and they may 
arrange to have the retailer handle the fruit on his own ac- 
count or on a commission basis. A grower far away as Mon- 
tana regularly stores some of his apples in eastern cold storage 
warehouses, from which they are delivered each day by a 
transfer or drayman to retailers who receive from 20 to 30 

* Proceedings of New Jersey State Horticultural Society (1912), 
p. 70. 




per cent, on the retail sales for their services as retail sales- 

On the whole relatively little fruit is as yet sold directly 
by growers to retailers at the large general fruit markets, the 
great bulk passing through the regular trade agencies men- 
tioned above. Though serious abuses -have at times arisen most 
of these agencies are, even by some of the exponents of growers' 
cooperation, regarded as "men of integrity, business energy 
and resourcefulness, and as equal in these respects to any 
other class of men who deal in the products of the soil." ^ 
It should be noted that the various agencies which have been 
discussed separately, frequently overlap — commissionmen, 
brokers and auction companies, for example, may act as job- 
bers, jobbers may handle some business on consignment, and 
local dealers may act as brokers. 

Eetailing of Fruit. — Fruit differs from the farm products 
previously discussed in that a larger portion of the crop is 
retailed to consumers. (1) A large proportion of the fruit 
crop is retailed by general grocery stores operating individu- 
ally or in chains, by special fruit and produce stores or stands, 
by fruit vendors and hucksters and other retail dealers who 
obtain their supply from the wholesale markets or direct from 
fruit growers. 

(2) Consumers purchasing in bulk sometimes purchase 
from certain wholesale dealers or commissionmen who do a 
retail as well as a wholesale business. 

(3) Growers located near the retail markets frequently 
retail their fruit, vegetables and other produce to the con- 

Fruit retailers reach the consumers in numerous ways. 
They may dispose of their fruit at private stores or stands, 
directly from railroad cars, at consumers' premises, or at pub- 
lic or municipal markets. The latter are particularly con- 
venient for growers who desire to retail in large cities.^ At 

^Annual Report of Montana Horticultural Society (1912), pp. 

« G. H. Powell, p. 205. 
■iS^ee pp. 23, 24. 





a limited number of municipal markets a wholesale as well 
as a retail trade in fruit and produce is conducted, but most 
of them are primarily retail markets. 

Fruit Growees' Cooperative Associations 

In no other branch of farming industry is there so much 
cooperation among growers as in the fruit and vegetable in- 
dustries. One of the conditions which has encouraged this 
cooperation is that many fruit-growing districts have been 
confronted by unusual difficulties in the shipping and mar- 
keting of their crops. The chief reason, for example, why 
cooperation was established at an early date in the Pacific 
and far-western districts was the difficulty of profitably sell- 
ing in distant markets. Cooperation among fruit growers is 
also encouraged by the geographical compactness of many 
of the growing districts, by the similarity of the fruit grown 
in a given district, by the successful education of many grow- 
ers in the trade possibilities of cooperation, and in some 
regions by the precedent of cooperative irrigation. 

The cooperative associations have been confronted by 
numerous obstacles as a result of which many have not been 
successful. The individuality and distrust of the growers 
which in many cases is broken down only by the force of 
necessity, management by impracticable and low-salaried man- 
agers, organization in times when the growers were prosper- 
ous and did not feel the effects of low pric-s, unfair demands 
by members as to prices and grading, the adoption of unsuc- 
cessful forms of organization and methods of cooperation, the 
production of inferior fruit, the disloyalty of members, and 
the attacks and opposition on the part of private buyers, have 
caused the downfall of numerous cooperative ventures. Many 
others, however, have been successfully organized and are in 
practical operation. 

The cooperative associations are variously organized, some 
of them being organized as joint-stock companies with dis- 
tribution of profits on a stock basis and others as simplp 



non-profit associations operated on a cost basis. The voting 
power of the shareholders is likewise arranged in different 
ways — on the basis of the amount of stock held, the acreage 
planted, the probable crop, or the crop of the preceding year. 
Fruit growers cooperate in many different lines of activity. 
As was previously mentioned some of them cooperate in the 
shipping and marketing of fruit, selling their crops either 
through regular trade agencies or through their own sales- 
men. The California (Citrus) Fruit Growers' Exchange, 
which is an instance of successful and extensive cooperative 
marketing, has a threefold organization: (1) Locally it is 
based upon 115 local associations, each comprising from 40 to 
200 growers and about 500 acres of orange and lemon groves. 
Each handles the fruit of its members on a cost basis, either 
for its individual members separately or by pooling it each 
month or season. (2) The local associations are banded to- 
gether in 17 district exchanges, which are also operated on 
a non-profit basis, and act as district clearing houses. They 
order cars for the local packing houses, keep a record of the 
cars shipped by each local association, keep them posted with 
authentic trade information, and return to them the proceeds 
of their sales. (3) The district exchanges, in turn operate 
through the California Fruit Growers' Exchange which is 
managed by a skillful manager and a board of directors. This 
central exchange provides the district exchanges with the 
necessary marketing facilities on a cost basis, gathers current 
information, issues daily bulletins, advertises, handles claims 
and litigation, provides an organized selling force consisting 
of some 75 principal offices in the leading markets of the 
United States, Canada and Europe and 200 salaried salesmen, 
and remits the proceeds of sales to the growers through the 
district exchanges.^ 

In the selling of fruit few cooperative associations have 
gone beyond the wholesale trade, but they have accomplished 

*G. H. Powell, pp. 241-246; Proceedings of 40th Fruit Growers' 
Convention of California, pp. 40-44; Ibid.— S9th, pp. 85-89; F. W. 
Powell: Cooperative Marketing of California Fresh Fruits, Quarterly 
Journal of Economics, Feb., 1910. 



much through careful distribution and shipping, protection 
of members' interests in the wholesale markets, and in some 
instances through eliminating some of the middlemen. They 
sell either for each grower individually, or when the fruit of 
a given district is fairly uniform, in pools arranged on a daily, 
monthly, semi-monthly or seasonal basis. 

The fruit growers of many districts also cooperate in the 
grading and packing of fruit, these functions being performed 
either by association employees at central packing houses or 
by the growers according to association rules and subject to 
inspection. Some harvest their fruit cooperatively, the fruit 
being picked either by gangs of trained association pickers or 
by the growers according to rules. Many cooperate in the 
purchase of fruit packages, harvesting, pruning and picking 
equipment and other supplies and fertilizers; in the protection 
of fruit from insects and pests; and in the erection of cold 
storage warehouses and the storage and pre-cooling of fruit. 
There is difference of opinion among the fruit growers as to 
the likelihood of generally going beyond the wholesale markets 
in the cooperative sale of fruit, but many are convinced that 
in the fields of activity mentioned above there are no valid 
reasons why they should not apply the same principles of 
united action which have been so effectively applied in the 
manufacturing, mining and transportation industries. 



Johnson, E. R., and Huebner, G. G. Railroad Traffic and 
Rates, Vol. I, chap, xii ; Shippers' Cars and Private Car 
Lines (1911), pp. 212-239. 

McKevitt, F. B. "Marketing of Fruit by California Fruit 
Distributors." Proceedings of 38th Fruit Growers' Con- 
vention of California, pp. 53-60 (1910). 

Powell, F. W. Cooperative Marketing of California Fresh 
Fruits, Quarterly Journal of Economics (Feb., 1910). 

Powell, G. H. Cooperation in Agriculture (1913), chap. yii. 

"Cooperation in the Handling and Marketing of Fruit," 

United States Department of Agriculture Year Book for 
1910, pp. 391-406 (1911). 



Seibels, Wm. T. Produce Markets and Marketing (1911). 

Thompson, C. W. ^Tlelation of Jobbers and Commissionmen 
to the Handling of Produce," The Annals of the Ameri- 
can Academy of Political and Social Science (Nov., 
1913), pp. 57-68. 

Waugh, F. a. Fruit Harvesting, Storing and Marketing 
(1908). ^ 

Woodford, B. A. "Organized Fruit Marketing," Proceedings 
of 39th Fruit Growers' Convention of California (1911) 
pp. 85-89. 

United States Bureau of Crop Estimates: Farmers' Bulletin 
No. 629 (Oct. 16, 1914), pp. 25-26; No. 641 (Nov. 23, 
1914), pp. 30-31; No. 651 (Feb. 6, 1915), pp. 10-12; No. 
665 (Nov. 20, 1915), pp. 13-14. 

United States Bureau of Foreign and Domestic Commerce: 
United States Commerce and Navigation Report (an- 

United States Census Office: Thirteenth U. S. Census, 1910, 
Agriculture (1913), Vol. 5, pp. 702-723. 

United States Industrial Commission : Report on Distribution 
of Farm Products (1901), Vol. VI, part 14, pp. 424-445. 

United States Office of Markets and Rural Organization (De- 
partment of Agriculture) : Bulletin No. 267 (Aug. 16, 
1915); No. 266 (Aug. 16, 1915); No. 298, Aug. 31, 

United States Standard Apple Grading Act (Aug. 3, 1912). 



Each of the great agricultural staples is usually classified 
into (1) certain classes, t}pes or general groups, and (2) into 
grades, and sometimes, as in case of leaf tobacco, the classes 
and types are further subdivided or distinguished. Ordi- 
narily the classes or types represent differences in variety, in 
the territory in which the product is grown, or in general 
character, appearance and quality. The grades on the con- 
trary represent specific differences in character, appearance, 
quality, cleanliness, condition or other special considera- 

Functions of Inspection and Grading^. — The division of 
commodities into classes and grades is not confined to the 
agricultural staples, articles such as coal, iron ore, pig iron, 
lumber, etc., being similarly handled. The practice prevails 
in practically all commodities which are produced by a large 
number of producers and are distributed in large quantities 
by a large number of dealers. Since these conditions prevail 
in the farming industries the inspection and grading of the 
agricultural staples is particularly important. 

The functions of commercial inspection and grading are 
various. (1) Thje practice facilitates the purchase and sale 
of farm produce. Though much spot produce is sold by act- 
ual examination of the commodities, it is a common practice 
to buy and sell on the basis of samples, or a combination of 
samples and grades, and sometimes on the basis of grades ex- 
clusively. Grading is particularly important in the making 
and fulfillment of private contracts calling for the delivery at 
a stated future time of commodities which have not at the 




time the contract is made been harvested or have not as yet 
been acquired by the dealer contracting to make the de- 

(2) It greatly facilitates the quotation and publication of 
spot as well as future prices. 

(3) It facilitates the storing and handling of commodities. of the Rocky Mountains ; for example, grain is commonly 
stored and handled in bulk, all grain of a particular grade 
being stored and handled in the same bins. Without inspec- 
tion and grading the operation of the modern grain elevator 
system would be greatly hampered. 

(4) It makes possible the general warrant or negotiable 
warehouse receipt system. Without systematic grading all 
grain elevator receipts would have to represent specific lots 
of grain stored in special bins, or otherwise all of the same 
variety would have to be indiscriminately mixed to the great 
detriment alike of growers, dealers and millers. 

(5) It facilitates the making of loans on farm produce, 
for it enables bankers to accept receipts issued by recognized 
warehouses or elevators with the assurance that they repre- 
sent the particular kind of commodity stated in the accom- 
panying inspection certificate. 

(6) It tends in a measure to protect buyers and sellers 
from unscrupulous and dishonest practices. Inspection and 
grading services, particularly in the local or country mar- 
kets, are not fully carried out, but so far as they are applied 
they serve to guarantee that commodity prices shall vary 
in accordance with the quality or condition of the articles 

(7) On the grain and cotton exchanges where speculative 
"futures" are bought and sold, inspection and grading are 
particularly essential, such contracts being invariably based 
upon one or more standard or basis grades, and in case of 
delivery, requiring the delivery of the basis grade or certain 
other specified grades at fixed or variable price differences. 

(8) In general, also the inspection and grading services — 
together with the central markets, exchanges, central ware- 
house systems and, in case of grain and cotton, the future con- 


tract system— facilitate the establishment of a national or 
world market for the agricultural staples. 

The Inspection and Grading Organization.— The agricul- 
tural commodities are variously inspected and graded by dif- 
ferent services or individuals : 

(1) In some cases, particularly in case of the gram 
handled at some of the large primary grain markets, the 
commercial inspection and grading service is conducted by 
the states through inspection bureaus, classification boards, 
railroad and warehouse commissions or public utilities com- 
missions. (2) In other cases it is performed by organized ex- 
changes through bureaus, boards or committees, or under their 
auspices. (3) Dealers, jobbers, commissionmen or other trad- 
ing and distributing agencies sometimes grade the commodi- 
ties which they handle; and (4) in some instances, particu- 
larly in the fruit produce and leaf tobacco trades, the grow- 
ers, individually or through cooperative associations, grade 
their crops before disposing of them. (5) The federal govern- 
ment does not perform actual grading services, but is instru- 
mental in the grading of various farm products. The United 
States Department of Agriculture has established a set of 
official cotton types and grades, and it has been authorized to 
establish official cotton standards and to settle cotton grading 
disputes submitted to it by either party to a future cotton 
contract. It has also endeavored to harmonize the grading 
and classification rules and practices in the grain trade 
throughout the various states. Congress has, moreover, es- 
tablished standard grades applicable to the interstate trade in 


The inspection and grading organization and the methods 
pursued in the grain, cotton, livestock, wool and leaf tobacco 
trades will be described more fully in the remainder of this 
chapter. 1 It is understood of course that the term inspection 
as here used refers to commercial inspection and not to public 
health inspection devoted to the detection of disease or the 
violation of the meat and livestock inspection or pure food 

* For fruit grading see chap, xii, p. 244. 




time the contract is made been harvested or have not as yet 
been acquired by the dealer contracting to make the de- 

(2) It greatly facilitates the quotation and publication of 
spot as well as future prices. 

(3) It facilitates the storing and handling of commodities. 
East of the Rocky Mountains ; for example, grain is commonly 
stored and handled in bulk, all grain of a particular grade 
being stored and handled in the same bins. Without inspec- 
tion and grading the operation of the modern grain elevator 
system would be greatly hampered. 

(4) It makes possible the general warrant or negotiable 
warehouse receipt system. Without systematic grading all 
grain elevator receipts would have to represent specific lots 
of grain stored in special bins, or otherwise all' of the same 
variety would have to be indiscriminately mixed to the great 
detriment alike of growers, dealers and millers. 

(5) It facilitates the making of loans on farm produce, 
for it enables bankers to accept receipts issued by recognized 
warehouses or elevators with the assurance that they repre- 
sent the particular kind of commodity stated in the accom- 
panying inspection certificate. 

(6) It tends in a measure to protect buyers and sellers 
from unscrupulous and dishonest practices. Inspection and 
grading services, particularly in the local or country mar- 
kets, are not fully carried out, but so far as they are applied 
they serve to guarantee that commodity prices shall vary 
in accordance with the quality or condition of the articles 

(7) On the grain and cotton exchanges where speculative 
"futures" are bought and sold, inspection and grading are 
particularly essential, such contracts being invariably based 
upon one or more standard or basis grades, and in case of 
delivery, requiring the delivery of the basis grade or certain 
other specified grades at fixed or variable price differences. 

(8) In general, also the inspection and grading services — 
together with the central markets, exchanges, central ware- 
house systems and, in case of grain and cotton, the future con- 


tract system— facilitate the establishment of a national or 
world market for the agricultural staples. 

The Inspection and Grading Organization.— The agricul- 
tural commodities are variously inspected and graded by dif- 
ferent services or individuals: 

(1) In some cases, particularly in ease of the grain 
handled at some of the large primary grain markets, the 
commercial inspection and grading service is conducted by 
the states through inspection bureaus, classification boards, 
railroad and warehouse commissions or public utilities com- 
missions. (2) In other cases it is performed by organized ex- 
changes through bureaus, boards or committees, or under their 
auspices. (3) Dealers, jobbers, commissionmen or other trad- 
ing and distributing agencies sometimes grade the commodi- 
ties which they handle; and (4) in some instances, particu- 
larly in the fruit produce and leaf tobacco trades, the grow- 
ers, individually or through cooperative associations, grade 
their crops before disposing of them. (5) The federal govern- 
ment does not perform actual grading services, but is instru- 
mental in the grading of various farm products. The United 
States Department of Agriculture has established a set of 
official cotton types and grades, and it has been authorized to 
establish official cotton standards and to settle cotton grading 
disputes submitted to it by either party to a future cotton 
contract. It has also endeavored to harmonize the grading 
and classification rules and practices in the grain trade 
throughout the various states. Congress has, moreover, es- 
tablished standard grades applicable to the interstate trade in 


The inspection and grading organization and the methods 
pursued in the grain, cotton, livestock, wool and leaf tobacco 
trades will be described more fully in the remainder of this 
chapter.^ It is understood of course that the term inspection 
as here used refers to commercial inspection and not to public 
health inspection devoted to the detection of disease or the 
violation of the meat and livestock inspection or pure food 

* For fruit grading see chap, xii, p. 244, 




time the contract is made been harvested or have not as yet 
been acquired by the dealer contracting to make the de- 

(2) It greatly facilitates the quotation and publication of 
spot as well as future prices. 

(3) It facilitates the storing and handling of commodities. 
East of the Rocky Mountains ; for example, grain is commonly 
stored and handled in bulk, all grain of a particular grade 
being stored and handled in the same bins. Without inspec- 
tion and grading the operation of the modern grain elevator 
system would be greatly hampered. 

(4) It makes possible the general warrant or negotiable 
warehouse receipt system. Without systematic grading all 
grain elevator receipts would have to represent specific lots 
of grain stored in special bins, or otherwise all' of the same 
variety would have to be indiscriminately mixed to the great 
detriment alike of growers, dealers and millers. 

(5) It facilitates the making of loans on farm produce, 
for it enables bankers to accept receipts issued by recognized 
warehouses or elevators with the assurance that they repre- 
sent the particular kind of commodity stated in the accom- 
panying inspection certificate. 

(6) It tends in a measure to protect buyers and sellers 
from unscrupulous and dishonest practices. Inspection and 
grading services, particularly in the local or country mar- 
kets, are not fully carried out, but so far as they are applied 
they serve to guarantee that commodity prices shall vary 
in accordance with the quality or condition of the articles 

(7) On the grain and cotton exchanges where speculative 
"futures" are bought and sold, inspection and grading are 
particularly essential, such contracts being invariably based 
upon one or more standard or basis grades, and in case of 
delivery, requiring the delivery of the basis grade or certain 
other specified grades at fixed or variable price differences. 

(8) In general, also the inspection and grading services — 
together with the central markets, exchanges, central ware- 
house systems and, in case of grain and cotton, the future con- 


tract system— facilitate the establishment of a national or 
world market for the agricultural staples. 

The Inspection and Grading Organizatian.— The agricul- 
tural commodities are variously inspected and graded by dif- 
ferent services or individuals : 

(1) In some cases, particularly in case of the grain 
handled at some of the large primary grain markets, the 
commercial inspection and grading service is conducted by 
the states through inspection bureaus, classification boards, 
railroad and warehouse commissions or public utilities com- 
missions. (2) In other cases it is performed by organized ex- 
changes through bureaus, boards or committees, or under their 
auspices. (3) Dealers, jobbers, commissionmen or other trad- 
ing and distributing agencies sometimes grade the commodi- 
ties which they handle; and (4) in some instances, particu- 
larly in the fruit produce and leaf tobacco trades, the grow- 
ers, individually or through cooperative associations, grade 
their crops before disposing of them. (5) The federal govern- 
ment does not perform actual grading services, but is instru- 
mental in the grading of various farm products. The United 
States Department of Agriculture has established a set of 
official cotton types and grades, and it has been authorized to 
establish official cotton standards and to settle cotton grading 
disputes submitted to it by either party to a future cotton 
contract. It has also endeavored to harmonize the grading 
and classification rules and practices in the grain trade 
throughout the various states. Congress has, moreover, es- 
tablished standard grades applicable to the interstate trade in 

The inspection and grading organization and the methods 
pursued in the grain, cotton, livestock, wool and leaf tobacco 
trades will be described more fully in the remainder of this 
chapter.^ It is understood of course that the term inspection 
as here used refers to commercial inspection and not to public 
health inspection devoted to the detection of disease or the 
violation of the meat and livestock inspection or pure food 

* For fruit grading see chap, xii, p. 244. 



■ r, 







1^^ . : 



Inspection and Grading of Grain 

At many country grain markets throughout the farming 
regions where grain is the dominant agricultural staple the 
grain sold to local buyers is graded locally by each purchaser 
individually or by inspectors representing all the buyers of a 
given market. At other local markets, particularly in regions 
where relatively little grain is' produced, no defmite grades 
are established, the buyers merely bidding on each lot of 
grain offered by the farmers. When, however, the grain bought 
at the country elevators and warehouses is shipped to the 
primary markets it is carefully graded in accordance with 
well-organized systems of public inspection. It may fre- 
quently happen that a carload graded locally as say No. 3 red 
winter wheat is sold at the primary markets as No. 2 or some 
other higher or lower grade. It is at the primary and sea- 
board markets that the grain is systematically graded for 
there most of it is stored and handled in bulk, there the 
general warrant (warehouse receipt) system prevails and 
grain becomes the basis for loans, there the grain is repeat- 
edly sold and resold by grade, sample, or grade and sample 
combined, there grain "futures" to which grading is abso- 
lutely essential are regularly dealt in, and there also the prices 
of spot grain and futures are determined. The farmers are 
directly concerned with the grading of grain at the primary 
markets whenever individually or as a cooperative association 
they ship their grain for ssilc in tbose niarkcls, but tliey bene- 
fit indirectly even when they sell locally, because the grain 
trade as at present conducted is in many respects based upon 
the prevailing system of inspection. 

Grain inspection at the central markets is conducted pub- 
licly, either through the grain exchanges or by a state inspec- 
tion service. Most of the principal grain-growing states have 
created public grain inspection departments, bureaus or 

minois Orain Inspection Service. — The organization and 
methods of the state grain inspection service of Illinois may 





lA. S.— 3243.1 



[July, 1913.1 

This schedule is to be mailed July i, 1913 (from Pacific Coast States June 27, 1913). It is used for all parts of the United 
States. Report ONLY on such crops named as are grown In your county. Please read carefully instructions on other side 
before making report. 

Condition sliould be reported on the baas of 100 reprc<?cnting a normal condition. (See paragraphs 1 and 4 on other side.) 

Total production should be reported on the basis of 100 representing a total production normally or usually raised in a favorable season. (See paragraph 6 on other side.) 

1. Corn. 

2. Wheat on 


3. V/lNTER 

4. Sprinq 


5. Oat3. 

6. Barlet. 

7. Rtk. 

8. PoTiTOBS (Irish). 

Acreage planted this year. 


What percent- 
age of L.\8T 
tear's crop 
remains on farms 
July 1. 1913? 
(See note f .) 

(See note 3.) 





Acreage planted this year. 


Compared with 

acreage planted 

last year. 

(See note f.) 


Compared with 

usual acreage. 

(See note 1.) 


Compared with 

acreage planted 

last year. 

Compared with 
usual acreage. 





Per ctnt. 

Per cent. 

Per cent. 


Per cent. 





9. Tobacco. 

10. Flax for seed. 

11. Rice. 

12. Apples. 

13. Hai 


14. Wool. 

Acreage planted this year. 


Acreage sown this year. 


Acroags sown this year. 





Compared with 

acreage planted 

last year. 

Compared with 
usual acreage. 


Cominred with 

acreage sown 

last year. 


Compared with 

usual acreage. 


Compared wich 

acreage sown 

last year. 


Compared with 

usual acreage. 


weight per 



Per cent. 

Per cent. 

Per cent. 

Per cent. 

Per cent. 

Per cent. 






15. TlMOTHT. 

16. Clovkr 


17. Alfalfa. 

18. Millet. 

10. Pa*. 


20. Kafir corn 


milo maize). 

21. Canadian 

OR Enoltsh 



23. Blue orabb 


24. Swnrr potatoes. 




Condi lion. 





Acreage planted this year. 



Compared with 

acreage planted 

last year. 

CJompared with 
usual acreage. 




Per cent. 


Per cent. 

Per cent. 







25. ToMA- 


26. Cab- 

27. OmoNB. 

23. Brvns for 


(not lima). 

29. Lima 

BEANS (pole 
AND bush). 

30. Peaches. 

31. Grapes. 

32. Pears. 

33. Black- 

34. Rasp- 

35. Straw- 

36. Waivr- 












Total production. 









Per cent. 



Per rent. 


37. Canta- 
loupes AND 

38. Oranges. 

39. Lemons. 

40. Hemp. 

41. Broom 

42. Sugar 

43. Sorghum. 

44. Sugar 


45. Hops. 

46. PKANirre. 




Per rent. 


Acreage vvndcr cultivation. 






Compared with 

acrenge under 


last year. 


Compared with 

usual acreage. 




Prr cent. 


Per cent. 

Per eerd. 

Per cent. 



Pir cms. 



AVERAGE FARM PRICE JULY 1, 1913. (See note 4.) 



per bushel 

of 70 lbs. in 

ear or 56 Iba. 



per bushel 
of 60 lbs. 



per bmhel 
of 32 lbs. 


per bushel 
of 48 lbs. 



per bushel 
of 56 lbs. 


p-ir bathel 
of 48 Iba. 


per bushel 
of 60 lbs. 


per bushel 
of 56 lbs. 




per ton 

of 2.000 lbs. 



(lint) per 



per pound. 






(live weight) 

per pound. 
(See noU 5.) 









DdHs. Cts. 





Nona. — I. Exclude silage com in all estimates of corn acreage. 2. In estimating the percentage of last year's wheat cron remaining on farms Julv 1, 1913, do not include any that may have 
B harvested this year, but do include that which mav have been carrie<l over from preceding years. 3. The condition of winter wheat at the time of harvest should be reported if the harvesting 
tl thb eereal bad begun prcviovis to the date indicated for mailing the schedule; otherwise make report Uie same as for the other crops. 4. Price which farmers receive at the home markets, the 
eoQBtj towns, and local railroad stations. Price reported should represent as nearly as possible the average of all sales. 5. Average of sales of all ages and wei^ts. 



Post Office „ Stale. 

Form 36 



This schedule is to be mailed November 1, 1913 (from Pacific Coast States October 27, 1913). It 
is used for all parts of the United States. Report ONLY on such crops named as are grown in your 
county. Please read carefully the instructions on the other side beiore making report. 

Condition should be reported on the bjisia of 10() representing a normal eondition. (See paragraphs 1 and 2 on other side.) 

Quality should be rcjwrted on the basis of 100 representing a high medium grade. (See paragraph 3 on other side.) 

Total production should be reported on the basis of 100 re])resenting a total production normally or usually raised in a favorable 
season. (See paragraph 4 on other side.) 

1. Corn. 

2. Average weight per MEASURED bushel op 


3. Buckwheat 


Average yield. 



What pcrcentafic 

of the 1U12 corn 

crop on farms 

Nov. I. 1913? 

(.Sec note 1.) 


W hat pcrcent- 

a(;c of the total 

acreage planted 

this year waa 

cut for silaRC? 

Winter wheat. 

Spring wheat. 





Average yield 
per acre. 


Bmhcls 0} r,G lbs. 
shelled (which 
it equivalmt tj 
70 /D«. in ear). 

Per eerU. 

Per cent. 

Per cent. 





Bushels of 48 

Per rent. 


4. Potatoes (Irish). 

5. ToBACtX). 

6. Flaxseed. 

7. Apples. 

S. Clover Seed. 


Average yield 

per acre. 


(a) , 
Average yield 
per acre. 



Average yield 

per acre. 


Total produc- 
(See par. 4.) 



Average yield 

per acre. 


Total production. 
(See par. 4.) 

Bushels of 60 

Per cent. 


Per cent. 

Bushdn of r,ft 
pound If. 

Per rmf. 

Per cent. 

Per cent. 

Bushels of 00 


9. Kafir Corn, or Milo Mai7e. 

10. CowPEAfl (not Canadian 
or field pca.s). 

11. RwEET Potatoes. 

12. Grapes. 

13. Pears, 


Average yield 

of grain per 



Total production 

of grain. 

(Sec par. 4.) 


1 otnl pr.-xliic- 

tion of grain. 

(Sec par. 4.) 

Total produc- 
tion of forarrc. 
(See par. 4.) 


.Avoraeo yield 

per acre. 





(See par. 4.) 





(See par. 4.) 


BuaheU of 53 Ib». 

Per cent. 


Per cent. 


Per cent. 

Per cent. 

Per cent. 

Per esnt. 


14. Cranberries. 

15. Oranges. 

16. Sugar Cane 
(not sorghum). 

!7. SoROHrM (not 
sugar cane). 

18. StoAk Beets. 

10. Peanuts. 


per acre. 




(See par. 4.) 




Average yield of 
S'rup por acre. 



Average yield per 



Total production. 

(See par. 4.) 








Per cent. 

Bushels of fti pounds. 

Per cent. 


AVERAGE FARM PRICE, NOVEMBER 1, 1913. {See note 2.) 



per bushel of 70 

lbs. in ear of 

AO IIm. Rhello 1. 



per bushel 
of m IIm. 



per bu'ihcl 
of 32 lln. 



per biii'icl 
of 4R lim. 



per bushel 
of m IIm. 



Buck wheat 
per btishcl 
of 4H IIm. 




per bushel 
of (Ui IIm. 



per Imsltol 
of m IIm. 




jxT ton of 
?jm IN. 

IhHs. Cts. 



(lint) per 








(live weight) 

nor pound. 

(nc« notfl 3.) 





Note 1. — In estimating the percentage of last year's corn crop remaining on farms November 1, 1913, do not include any that 
may have been harvested this year, but do include that which may have been carried over from preceding years. 

Note 2. — Price which farmers receive at the home markets, the county towns, and local railroad stations. Price reported should 
represent as nearly as possible the average of all sales. 

Note 3. — Average of sales of all ages and weights. 




Post Office. 


Form 37 



be accepted as a standard illustration of state grain inspection 
both because it was the first to be established in the United 
States ^ and because it operates in Chicago, the largest grain 
: mrket in the world. Prior to 1904 the so-called "track sys- 
ni'^ of inspection prevailed in Chicago as it also did in other 
central grain markets. Under this system the grain was in- 
spcctod in the cars l)y individual inspectors who worked in 
the open freight yards. In that year, however, the much 
jmprovcd system of "room*' or "office inspection" was adopted 
















Form 26 


at Chicago, and since then it has also been established in 
Minneapolis, Dulutli, BufTalo and in part at other markets.* 
Office inspection is superior to track inspection in that it 
avoids the bad influence of adverse weather conditions upon 
the judgment of the inspectors and the condition of the 
grain, substitutes the combined judgment of several inspec- 
tors for the individual judgment of one, and has the ad- 
vantage of laboratory aid in the determination of the per- 
centage of moisture. The grading of grain is at best largely 

* Established m 1871. 

•J. C. Merrill: ** Classification of Grain into Grades,*' The An- 
nals of the American Academy of Political and Social Science, Sept, 
1911, p. 62. 



a matter of human judgment rather than one of scientific 
exactness, and this judgment is less subject to error under 
the favorable conditions of a well-heated or cooled and lighted 
inspection room than in the open freight yard which is sub- 
ject to varying conditions of excessive cold or heat and of 
rain or snow. 


Under the office inspection plan as now conducted at Chi- 
cago, a corps of state samplers take samples from all the cars 



Un^lfV&i TraASCl*ipt of inspectors ORAOINO OP<iRAIN^ __I«U 



I InmpecUon 

Form 27 

arriving at the freight yards. These samples consisting of 
two quart bags filled with grain drawn from different parts 
of each car ^ are properly marked and together with the rail- 
road notice of arrival are turned over to the inspectors at the 
inspection office, where they are emptied into receivers and 
immediately graded. If the inspector in charge of a given lot 
has any doubt as to the proper grade '"he calls upon the chief 
grain inspector or supervising inspector who is always present 
and their combined judg ment determines the grade. Fre- 

*W. S. Cowen: ** Grain Inspection in Illinois/' The Annals of 
the American Academy of Political and Social Science, Sept., 1911. 
pp. 81-90. 



quently all the inspectors are called around the table holding 
some particularly difficult sample and each inspector is re- 
quired to make a grade for it and give his reasons therefor." ^ 
As soon as a sample is graded the grade is noted on a 
card such as is reproduced in Form No. 26, the sample and 
card are placed in the original bag, and are passed along to 
the official record writer, who enters the name of the delivering 
railroad, the car number, the grade, dockage and test weight 
of the grain, the reasons for the grade given, the names of the 
consignees and inspector who did the grading, and the num- 


is A4/ru/e^J^ M4/iervtA€ort/,c^^ Illinois State Grain inspection Department 


Form 28 

ber of the hook on which the sample is to be hung on the 
official card record sheet, a copy of which is shown in Form 
No. 27. The samples are then taken to the "splitting" depart- 
ment where a group of men divide them into two equal parts, 
and they are again examined by two inspectors so as to min- 
imize the likelihood of error. One-half of each sample is 
placed in a paper bag together with the railroad notice and 
sent to the Board of Trade to be placed in charge of the firm 
handling the shipment, and the other is returned to the 
original bag and hung upon its proper hook in the sample 
room to be preserved for twenty-four hours and then emptied. 

^ Ibid., p. 83. 

T 1 





I i: 



The official grade is stated in a state inspection certificate, a 
copy of which is reproduced in Form No. 28. 

Should there be dissatisfaction with the original inspec- 
tion, application for reinspection may be made on Form 

to the 

Illinois State Orain Inspection Department— 


We herewith request Re-Inspection x>{ Cars detailed below. If Original Inspection 
a sustained we agree to pay you Fees applying and now in effect. ' 

Original inspection. 

Re-inspection called. 



Re-inspection accomplished. 


^91 — 










ROAD OR I Deputy 




-Sustained ) 
Xbanged ) 


OCcial Record Harraoniicd. 


'CLERK. Per- 

FoBM 29 

No. 29. Even thereafter an appeal may be made to the "Ap- 
peals Committee" which consists of three men not connected 
with the inspection department and not engaged in the pur- 
chase or sale of grain. The judgment of this committee, after 
obtaining and examining fresh samples, is final rnd is binding 
upon the parties making the appeal. 




All grain stored in the central elevators is inspected and 
graded at least twice — once as has just been described, when 
it is loaded "in," and again when it is loaded "out.'^ Aa 
was previously mentioned it is owing to the difference be- 
tween the "in" and "out inspection" that profits may be 
realized from the mixing of grain in private elevators or spe- 
cial bins.^ So-called house inspectors are stationed at the 
elevators of Chicago by the state inspection department to 
grade the grain shipped out, but in order to make the in and 
out inspections equally severe, the department also requires 
that samples from each car or vessel load be sent to the main 
office for reinspection by a board of review under the direct 
supervision of the chief grain inspector, any errors in the 
work of the house inspector being subsequently changed. 

The Illinois State Grain Inspection Department operates 
under civil service rules. Its immediate head is the Chief In- 
spector of Grain, and it is administered in accordance with 
rules prescribed by and is under the supervision of the Illinois 
State Public Utilities Commission. As was formerly stated 
the work of state inspection is conducted hand in hand with 
state weighing, warehouse receipt registration and elevator 

Factors Determining Grades of GraiiL — F our principal 
considerations determine the classification of any given lot of 
grain. (1) Grain is classed by general varieties. Thus win- 
ter wheat is classed separately from spring wheat and these 
classes in turn may be subdivided into white, red, hard, north- 
em, durum, velvet chaff, western or other varieties. 

(2) Differences in quality and appearance are important 
grading considerations. The evidences of quality and ap- 
pearance sought for are numerous. To be assigned a par- 
ticular grade a given lot must meet all the requirements and 
restrictions as to weight, soundness, "plumpness" or shape 
of berry, dryness or dampness, "sweetness," coolness or heat, 
and ^T)rightness" or color. The inspectors may also determine 
whether the grain is badly bleached, musty, "smutty,'* 

* Chap, iv, p. 82. 
*Ihid., pp. QQ, 67. 






''shrunken/' "cracked" finely or broken, scoured, clipped, 
chemically treated, or unfit for warehousing. In connection 
with some of the grades of wheat, good ''milling quality" is 
also a grading requirement. Millers do not, however, regard 
the official grades as evidence of quality, for while weight, 
plumpness, etc., are important conditions of quality, yet the 
public inspectors do not make a scientific test of gluten con- 
tent or other direct evidences of milling quality. Mills are 
largely obliged to make their own tests, and in cities 
laboratories devoted to a scientific analysis of wheat samples 
have been established.^ 

(3) ''Cleanliness' is a grading consideration, i. e., the 
relative absence or presence of straw, chaff and other foreign 
substances or foreign seeds. 

(4) The degree of mixture of varieties affects grading, 
N"o. 2 red winter wheat for example not permitting of more 
than 5 per cent, of white winter wheat, and Nos. 3 and 4 of 
not more than 8 per cent. 

The Grades of Grain.— The Grain Dealers' National As- 
sociation, the Chief Grain Inspectors' Association and the 
United States Department of Agriculture have done much to 
harmonize the classification and grading rules, and practices 
of the different states and central markets, but complete uni- 
formity has not as yet been accomplished. A carload of grain 
shipped from one interior market to another or from an in- 
terior to a seaboard market may be variously classified and 
graded at different points. 

The official state classification and grading rules applied 
in Chicago will serve to illustrate the general practice. The 
following rules indicate the difference between the various 
grades of white winter wheat :^ 

No. 1 white winter wheat shall include all varieties of pure 
soft white winter wheat, sound, plump, dry, sweet and cleaa, 
and weigh not less than 58 pounds to the measured bushel. 

*U. S. Bureau of Labor Statistics: Wheat and ^''our Prices 
from Farmer to Consumer (1914), p. 31. 

* Established by State Public Utilities Commission of Illinois. 
July 1, 1914. ' 


No. 2 white winter wheat shall include all varieties of soft 
white winter wheat, dry, sound and clean, and shall not con- 
tain more than 8 per cent, of soft red winter wheat, and 
weigh not less than 57 pounds to the measured bushel. 

No. 3 white winter wheat shall include all varieties of soft 
white winter wheat. It may contain 5 per cent, of damaged 
grains other than skin-burnt wheat, and may contain 10 per 
cent, of soft red winter wheat, and weigh not less than 53 
pounds to the measured bushel. 

No. 4 white winter wheat shall include all varieties of soft 
white winter wheat not fit for a higher grade in consequence 
of being poor quality, damp, musty, or dirty, and shall not 
contain more than 10 per cent, of soft red winter wheat, and 
weigh not less than 50 pounds to the measured bushel. 

The complete list of Chicago wheat classes and grades are 
as follows: 

Classes Grades 

White winter wheat Nos. 1, 2, 3, 4 

Red \^ nter wheat Nos. 1, 2, 3, 4 

Hard winter wheat Nos. 1, 2, 3, 4 

Hard spring wheat No. 1 

Northern spring wheat Nos. 1, 2, 3, 4 

Spring wheat Nos. 1, 2, 3, 4 

Durum wheat Nos. 1, 2, 3, 4 

Velvet chaff wheat Nos. 1, 2, 3, 4 

Western red wheat Nos. 1, 2, 3, 4 

Western white wheat Nos. 1, 2, 3, 4 

Western hard winter wheat Nos. 1, 2, 3, 4 

Mixed wheat Nos. 1, 2, 3, 4 

In comparison the wheat grades of New York, to which 
city much wheat is shipped from Chicago, are as follows : 

Classes Grades 

White winter wheat Nos. 1, 2, 3, 4, no grade 

Red winter wheat Nos. 1, 2, 3, 4, no grade 

Mixed winter wheat Nos. 1, 2, 3, 4, no grade 



Classes Grades 

Hard winter wheat Nos. 1, 2, 3, 4, no grade 

White western wheat. Nos, 1, 2, no grade 

Hard spring wheat No. 1 

Northern spring wheat Nos, 1, 2 

Spring wheat Nos. 3, 4, no grade 

Macaroni wheat Nos. 1, 2, 3 

The lack of uniformity resulting from differences in the 
number of classes and grades and in grading rules or stand- 
ards, and from those due to the variable element of human 
judgment which is always present in the grading of grain, 
has at times caused confusion. The usual differences between 
markets, however, are understood by the grain trade, the dif- 
ferences have gradually become narrower, and the methods 
and machinery of inspection have in recent years been im- 
proved in many of the principal grain centers. 

Cotton Grading and Inspection 

The same reasons which underlie the careful classification 
and grading of grain also underlie the classification and grad- 
ing of cotton, for both commodities are the basis of a vast 
trade in future contracts as well as of spot or cash transac- 
tions. The difficulties encountered in the inspection of cot- 
ton are even greater than in the case of grain, for the cotton 
crop comprises a wider range of quality. Cotton grades are 
vitally affected by differences as to the time of ripening and 
harvesting, methods of picking, soil conditions, and as to 
storms, frosts and other conditions of weather. These dif- 
ferences, if general, give every cotton crop a more or less 
distinctive character, and, if limited to particular sections of 
the cotton belt, cause wide differences in the range of quality ; 
indeed cotton of many qualities is sometimes unavoidably com- 
pressed into a single bale. The wide range in the varieties of 
cotton grown throughout the South, moreover, adds to the 
general confusion. 




Cottan-grading Factors.— The various "grades" recog- 
nized on the cotton exchanges and generally in the trade, de- 
pend largely upon three considerations: (1) color, (2) 
relative freedom from leaf and other foreign substances, and 

(3) character. 

In the matter of color three main divisions are recog- 
nized—white, tinged and stained. Cotton is "white" when it 
opens in the fields and is picked before being affected by frosts 
or winter storms; it is "tinged" when the bolls before they 
open are lightly frosted or when the cotton has been exposed 
to rain so as to give to the cotton a yellowish or golden orange 
color; and it is "stained" when heavy frosts or severe rain- 
storms turn its natural white color into a deep orange or 
tawny color. White cotton may have different degrees of 
white ranging from "bright" to "bluish"; and tinges and 
stains may have different degrees of color. The classification 
returns of the New Orleans Cotton Exchange, for example, 
in addition to standard white and staple cotton, recognize off- 
colored, spotted, light-tinged, medium-tinged, tinged, light- 
stained, medium-stained, stained, flash-dust and gritty ^ cot- 
ton. The many differences in color due chiefly to weather and 
soil conditions, constitute one of the difficulties of grading; 
the passing of a cloud or the presence of snow on the ground 
may unconsciously influence an inspector to the extent of as 
much as a quarter of a grade.^ 

Leaf and other foreign substances or impurities such as 
dry leaves, specks of dust, dirt, sand, bits of husk, strings, 
motes, gin-cut fiber, cut-seed and unripe fiber, vary from year 
to year, from one growing district to another, and from one 
bale to another and are direct grading factors.^ The "char- 

* Eules of the New Orleans Cotton Exchange, Nov. 6, 1914, p. 38. 
»U. S. Bureau of Corporations: Cotton Exchanges (1908), Part 

1, p. 65. 

"'Motes" are immature seeds or ends of seeds that are pulled 
off in ginning. *'Neps" and ** cut-fibers ' ' are lots, bunches or kinds 
resulting from feeding the gin too rapidly, from the gin being in bad 
order, from the presence of unripe fiber, or from dampness. 
** Strings" result from ginning unripe or wet seed-cotton or from the 
wrong adjustment of the gin-saw brushes. ** Cut-seeds" result from 



I I 

I 1 



acter" of the cotton is a more indefinite consideration, refer- 
ring to the general condition or quality of the cotton. All the 
grading factors are essentially dependent upon human judg- 
ment, and it is entirely probable that no two experts would 
grade a large lot in exactly the same way or that the same 
expert would grade it in exactly the same way at different 

The commercial "grades" of cotton do not regularly take 
into consideration the length, strength, pliability, cling and 
evenness of the cotton fiber, although these considerations are 
of great importance to the spinner, and it is partly because of 
their disregard that many spinners do not buy solely on the 
basis of grade. They commonly buy either by sample, or com- 
bination of grade and sample. When they purchase by grade, 
one of the practices of the cotton trade is to state the staple as 
well as the grade, as for example, "fully good middling, 1^ 
inch staple, Liverpool class," or "strict low middling lyV 
staple, New York class." Another practice is to state the 
length of staple in comparison with the length of staple of a 
type which has been agreed upon as a standard by both buyer 
and seller. In the spot markets, cotton, the fiber length of 
which is 1^ inches or above, is usually known as "staple cot- 
ton" and is more commonly sold by sample than in any other 
manner. In case of contract deliveries, the New York and 
New Orleans Exchanges make no allowance unless at least 80 
per cent, of a lot of cotton has a staple of at least 1 or 1^ 
inches respectively ; and limit it to i cent per pound. These 
allowances, moreover, are in the price paid for the cotton and 
not in its grade. 

The various general classes of cotton recognized by the 
trade, such as Atlantic Upland, Gulf, Texas, peelers, cane- 
brake, rivers and benders, convey to the cotton buyei much 
information as to the length and strength of the cotton staple. 
These classes which indicate general differences in variety, 
length of staple and region of growth are defined in chapter V. 

"fast ginning with a hard roll and by broken or bent gin-saw teeth 
that strike the grate bars.'^ See U. S. Bureau of Plant Industry: 
Farmers' Bulletin No. 591, July 10, 1914, pp. 3-5. 


It is probable that in the future spinners will be enabled 
to purchase a larger share of their cotton on the basis of 
known standard types, for the Secretary of Agriculture has 
been authorized by the Cotton Futures Act "to establish and 
promulgate standards of cotton by which its quality or value 
may be judged or determined, including its grade, length of 
staple, strength of staple, color, and such other qualities, 
properties, and conditions as may be standardized in practical 
form which shall be known as the 'Official cotton standards of 
the United States.' " 

Cotton Grades. — The grades in most common use in Amer- 
ican spot cotton markets are thirteen in number, as follows : 

Above Middling 

Below Middling 






Strict middling fair 


Strict low middling 


Middling fair 


Low middling 


Strict good middling 


Strict good ordinary 


Good middling 


Good ordinary 


Strict middling 


Strict ordinary 



"Middling" cotton is invariably the basis grade, and the 
grade names containing the word "strict" are known as "half" 
grades in contrast with the remaining or "full" grades. Fre- 
quently many additional grade names are used, because the 
thirteen grades mentioned above unless further qualified have 
reference only to white cottons. In grading colored cotton the 
general practice in the larger spot markets is to add to the 
usual grade names the words "off color" or "fair color," 
"spotted," "tinged," or "stained," the result being that there 
may be various classes of the same grade of cotton.^ 

As in the case of grain, there has been and still is lack of 
uniformity among the various cotton markets as to the num- 
ber of grades recognized and the severity of the rules govern- 
ing them. As long ago as 1874 the cotton exchanges of the 

*U. S. Bureau of Plant Industry: Farmers' Bulletin No. 591, 
July 10, 1914, p. 2. 


il' 'V| 



United States endeavored to bring about uniformity by adopt- 
ing a system then known as the American classification, but 
which later became known as the New York classification be- 
cause the exchange of that city adhered to it for forty years. 
Until January 1, 1908, this classification as enforced in New 
York comprised 30 grades, 11 full grades, 10 half grades, and 
9 quarter grades. The basis of this, as of all other cotton 
classifications, was "middling" cotton, above which there were 
nine superior grades and below which there were 20 grades of 
inferior quality.^ All of these grades were for many years 
deliverable on New York contracts, but grading practices had 
meanwhile changed throughout the South and there was com- 
plaint that too many low grades were deliverable in the New 
York market. The New York Cotton Exchange, therefore, on 
January 1, 1908, reduced the number of deliverable grades to 
19, on April 1, 1908, to 18, and on December 1, 1914, to 14. 
In 1915 this entire system of classification was abandoned in 
favor of a system based upon the standard grades established 
by the United States Department of Agriculture. 

In an effort to bring about greater fairness and uniformity 

* The New York classification prior to Jan. 1, 1908, contained the 
following grades, the terms *' barely'* and *' fully'* indicating quar- 
ter grades, the term ''strict'* half grades, and the others being full 
grades : 

t Fair 

t Strict middling fair 
Middling fair 

* Barely middling fair 
Strict good middling 

* Fully good middling 
Good middling 

* Barely good middling 
Strict middling 

Strict low middling 

* Fully low middling 
Low middling 

* Barely low middling 
Strict good ordinary 

* Eliminated on Jan. 1, 1908, 
t Eliminated on Dec. 1, 1914. 
i Eliminated on Apr. 1, 1908. 

* Fully good ordinary 
t Good ordinary 

Strict good middling tinged 
Good middling tinged 
Strict middling tinged 
Middling tinged 
Strict low middling tinged 
t Low middling tinged 

* Strict good ordinary tinged 

* Fully middling stained 
Middling stained 

* Barely middling stained 

t Strict low middling stained 

* Fully low middling stained 

* Low middling stained 


in the grading of cotton, Congress in 1909 directed the De- 
partment of Agriculture to establish a set of so-called stand- 
ard grades, and the department decided upon nine grades of 
white cotton as shown in Table XII. The differences in 
value of the various grades as compared with "middling" cot- 
ton, which are shown in this table, are only approximate and 
fluctuate from time to time. 


Standard Grades and Approximate Differences in Yalue 

Qrades Approximate Difference in Value per 


Middling fair 1 cent above middling 

Strict good middling.... I cent above middling 

Good middling yV <^e^* ^^^^^ "^.7!?!'''^ 

Strict middling i cent above middhng 

Middling Basis 

Strict low middling i cent below middling 

Low middling i to f cent below midd mg 

Strict good ordinary.... i to 1 cent below middling 

Good ordinary 1 A to 1 ,^ cents below middling 

Sets of these grades are put up in boxes, each grade box 
containing twelve types of a given grade, and are sold at cost 
to all persons, exchanges or organizations interested m cotton 
grading. Although their adoption in stop markets is not 
compulsory, up to May 1, 1914, they had been officially 
adopted as the basis of cotton grading by the exchanges of 
New Orleans, Memphis, St. Louis, Charleston, Natchez, Little 
Rock, Galveston, Macon, Mobile, Oklahoma and New York, 
and by the New England Cotton Buyers' Association, the 
Arkwright Club, the Southern Cotton Buyers, and the Fall 
River Cotton Buyers, and had been widely distributed to pri- 
vate cotton concerns.^ 

These standard grades, moreover, were legally applied to 
future contr act transactions by the Cotton Futures Act which 

»U. S. Bureau of Plant Industry: Farmers' Bulletin No. 591, 
p. 12. 






became effective on February 18, 1915, and by the accompany- 
ing rules of the Secretary of Agriculture. 

The adoption of the standard grades by an exchange does 
not limit its grades to nine. The standard grades merely 
serve as the basis of classification and as a limit upon the 
range of deliverable cotton. The New Orleans Cotton Ex- 
change, for example, which had adopted them as its basis 
even before the passage of the Cotton Futures Act, recognizes 
seventeen classes of white cotton as follows : 

Middling fair 

Strict good middling to 
middling fair 

Strict good middling 

Good middling to strict 
good middling 

Good middling 

Strict to good middling 

Strict middling 

Middling to strict mid- 


Strict low middling to 

Strict low middling 
Low middling to strict low 

Low middling 
Strict good ordinary to 

low middling 
Strict good ordinary 
Good ordinary to strict 

good ordinary 
Good ordinary 

As stated above (page 271) the New Orleans Exchange 
also requires the classifying for off-colored, spotted and dis- 
colored cottons in accordance with these classes. The grades 
deliverable on a future contract^ however, are limited to the 
grades stated in the contract (page 141) and fall within the 
range defined by the standard grades of the Department of 

In 1914, the New York Cotton Exchange also adopted the 
standard grades of the Department of Agriculture as the basis 
of classification for all contracts maturing April 1, 1915, and 
thereafter. The Cotton Futures Act, however, resulted in 
their general adoption on February 18, 1915, the exchange 
recognizing the nineteen grades indicated in Form No. 35 
(page 284). The grades deliverable on future contracts as in 
case of the New Orleans Exchange are limited so as to comply 
with the provisions of the Cotton Futures Act. 


In June, 1913, an international convention of cotton ex- 
changes was held at Liverpool, and an endeavor was made to 
bring about an international standard of cotton classification. 
The convention decided in favor of the Liverpool standards ^ 
with certain changes in the lower grades. This system of 
grading has, however, not been adopted by American ex- 
changes, although it is urged by the New York Cotton Ex- 
change in preference to the standard grades established by the 
Department of Agriculture.^ 

The "official cotton standards of the United States" which 
the Secretary of Agriculture may establish in accordance with 
section 9 of the Cotton Futures Act may in the future cause 
wide changes in cotton grading, for he is instructed to con- 
sider not only the usual factors which have influenced cotton 
grading but also the length and strength of staple, and any 
other properties which may be standardized. When estab- 
lished, these official standards may, moreover, tend to bring 
about a greater degree of uniformity than has thus far pre- 
vailed in the cotton trade, because many spot markets will 
doubtless adopt them voluntarily and exchanges upon which 
futures are sold are legally required to adopt them. The rules 
of the New Orleans Cotton Exchange, for example, provide 
as follows: 

RULE 39. The present Type Standards, which are those 
adopted by the United States Department of Agriculture, shall 
govern all transactions for delivery made under these rules 
and those previously existing. When, however, the "Official 
Cotton Standards of the United States," to be established by 
the Secretary of Agriculture, under the United States Cotton 
Futures Act, are promulgated, they shall become the official 
standards of the New Orleans Cotton Exchange and shall be 
the basis of settlement of all "New Style" contracts then exist- 
ing, whether or not the value of such contracts is thereby 

* Liverpool Standard Grades are: Middling fair, fully good mid- 
dling, good middling, fully middling, middling, fully low middling 
(1 tinged type), low middling (grayer), fully good ordinary (ofif- 
color), good ordinary (off-color), and ordinary. 

*See Textile Manufacturers* Journal, May 9, 1914, pp. 77-79; 
Ibid., May 2, 1914, pp. 79-83. 





New York,. 




The following is a report 6f Cotton 

inspected by me at . ^ 

For account of_ 

Request No Passed. 

Weigher, -^ 

-Bales. Rejected 

, Samples^ 






■■»■ HI" ■» ■ ■ 1 J ■ ■■ ■ 

Form 30 (front) 


Form 30 (back) 



















































I 'I 

I , 





Prior to 1909-1910 the grading organization of the New 
York and New Orleans exchanges differed widely, the latter 
having had a board of arbitrators to pass upon cotton when 
tendered for contract deliveries and assuming no official re- 
sponsibility for the grades of the cotton. Since then, how- 
ever, the New Orleans Cotton Exchange has adopted the New 
York plan, both exchanges having an official inspection bureau 
and an inspection fund, and both provide for the regular issue 
of inspection certificates. Their inspection organizations dif- 



louni of 

- . /9 


For Aci 

• ■ .. -INSPECTOR N, Y. C. EX. 







WHY Rejected 




^— ^ ^^ 



Form 31 

fer in details but the New York plan may be regarded as 
typical of both exchanges. 

The owner of a lot of cotton received at New York, if 
desiring to "certificate" his cotton, notifies the inspection 
bureau to that effect and states the name of a licensed weigher. 
The inspector-in-chief thereupon details an assistant inspector 
and sampler to undertake the preliminary classification. Sam- 
ples are drawn from both sides of each bale by the sampler, 
the bales are weighed both by the weighmaster and the as- 
sistant inspector, they are grouped into lots of roughly uni- 
form grade, each bale is given a lot number, and thosr 



which seem to be below any recognized grade are rejected. 
The rejection of bales by the assistant inspector is, however, 
not final, the rejected samples being passed upon by the classi- 
fication committee. 

The following reports are then made to the inspection 
bureau: (1) assistant inspector's report of cotton received 

Inspection Bureau, New York Cotton Exchange. 

JMcjr l«i-X'. 


Sftuni n£ 







• ALI* 











Uetriieii IIWr»er. | 

Form 32 

(Form 30), (2) report of cotton rejected (Form 31), and 
(3) a weighmaster's return of weights (Form 32). 

The samples drawn from the bales are divided into two 
parts, and taken to the sample rooms where they are placed 
in papers and are opened and exposed to the air for twenty- 
four hours.^ They are then compared by a member of the 
classification committee, and one set is retained at the sample 
room to remain there until the cotton is shipped or reclassed 

while the other or original sample is taken to the classification 

^ ____^ ' 

* Bule as to length of exposure not always observed. 




room. Both sets of samples are identified with a poster, the 
form of poster attached to the original set being reproduced in 
Form 33. Two members of the classification committee then 
pass on each lot of samples, a third being called in case of dis- 
agreement. In addition to their expert knowledge these grad- 
ers have before them a standard set of working cotton types 
with which they may compare the samples. Upon arriving at 



M » M 



• «^^wi g>w .~~....» 

HLjLmu Independent Stores 

.SSmll^ ^&dm 

— —••>»■■••—■ a^^— ^f— I 


Form 33 

a decision they enter their findings in a memorandum (Form 
34), one copy of which is retained by the classification com- 
mittee and the other given to the owner of the cotton.* The 
owner if dissatisfied may appeal from the original grading 
within ten days, in which case the duplicate set of samples 
which was retained at the sample room is submitted to the 
entire classification committee or to at least four members for 
final decision, their findings being entered in a memorandum 

* Grades changed somewhat since Feb. 18, 1915. Correct grades 
shown in Form 10. 



New York,. 


Classification of. Bales Cotton 

Submitted by i..- 

Mark^ Lot No^ 




_8triot Middling Fair 
.Middling Fair 
_8trtct Good Middling 
-Fuily'cood Middling 

.Barely Cood Middling 



Fully Middling 

.Barely Middling 


.Strict Low Middling 


.Fully Low Middling 

1.00 off 

.Strict Good Ordinary 

1.00 off 

.Good Ordinary 

.StrictCood Middling Tinged 

V»l« of MM. _. . 

.Good Middling Tinged 

.Strict Middling Tinged 

.•off _ 
.Middling Tinged 

.Strict Low Middling Tinged 

1.(0 off 

.Low Middling Tinged 

l.«O0 . ^ 

Middling Stained 




FoBM 34 


J I 



slip similar in form to the memorandum reproduced in 
Form 34. When the grades are finally established the inspee- 
tor-in-chief issties an official certificate (Form 35) which is 
guaranteed by the exchange and is used in the making of 
deliveries. This certificate covers the grade for one year, 
unless the cotton is meanwhile withdrawn from the ware- 
house for shipment or unless the person to whom the cotton 
is delivered requests a reclassification. Any reduction of 



- nnnn v*m ■-■ -in ^'^ Compressed. 

1to.l3aQQ_i, l^^m^ J Bde, Uncompressed. 

9 3 1 

9Uc«ipt tfito (5««t«^cot« i» -ibcMtificb a» Sot Slo. 

-, «uttA *v(%ictt 


.; — SiaUa vmt* ctoaaeb tif rfi« ^Sfcuv-. if cation CoMtmin** ao fottotwn 


IM iUMnMriM n m »et m i w « inn rm tntm. cmM 


T«it cf aTif ictn au (euvem* 




—Middling Fair 
-Strict Good Uid. 
-Good Middlinc 
-Strict Middling ' 

— Strict Low Mid. 

, tow Middling 
—Strict Good Ord. 
_Cocd Ordinaf7 

-Strict Good Mid. Yellow Ting«d 
-Good Middling Yellow Tinged 
-Strict Middling Yellow Tinged 
Middling Yellow Tinged 

-Strict Low Mid. Yellow Tinged 
-Low Middling Yellow Tinged 

OMtoKKO ar 


-Mid. Blue Tinged 
-S-t Low MidBlncTgd 
-Li>w Mid. Bloc T-gd 

-Mid. Yellow Staiocd 

a*A tAot tK* <jtAbt» a» »p«cif«6 o&ov« oc« cot**ct^ 
9Uw ^o«<i, . 


•■ ii 

grade in case of such reclassification entitles the receiver to 
draw upon the inspection fund of the exchange to the extent 
of such reduction, the fund being derived from the fees col- 
lected by the inspection bureau. i. 

Although, owing to the extensive sale of speculative future 
contracts, an unusual amount of attention has for many years 
been given to the grading of grain and cotton, other farm 
staples are also classified and graded at some stage or other 
of their distribution from producer to consumer. The pur- 
chase and sale of livestock, wool^ tobacco and fruit in the 
great spot markets for those commodities, the quotation of 


spot prices and the granting of loans are greatly facilitated by 

Commercial Classifying and Grading of Livestock 

Livestock sold by growers to local dealers is seldom graded 
at the local markets, each animal or group being purchased 
by actual inspection on the part of the buyer. Those sold in 
the stockyards of the large central markets are likewise sold 
by actual inspection at the pens, but as formerly stated they 
are usually divided into "bunches'* so as to attain approxi- 
mate uniformity in "character and quality." This classifica- 
tion into "bunches" by commissionmen for the purpose of 
sale is a form of grading, but it is not conducted in accordance 
with fixed rules. The animals of any particular shipment are 
bunched in accordance with the views of the commissionman 
and the buyers as to number, sex, age, and often as to their 
quality for dressed meat, export, canning, curing, stocking, 
feeding or other purposes. 

Classes and grades are also needed at the central markets 
for the quoting of livestock prices. The animals are not sys- 
tematically classed and graded for this purpose, but from the 
sales which are made at the stockyards each market is able to 
publish prices in terms of classes and grades which are gen- 
erally understood by the trade. There is, however, no uni- 
formity either in the factors considered or in the terms used 
to designate the grades. 

In quoting the prices of cattle, for example, a distinction 
IS made between "native," "western," and "Texan" cattle, 
which constitute classes indicating in general their breed and 
the place where they are raised. Native cattle are bred and 
raised on the farms of the Central West, western cattle on the 
ranges and ranches of the Far West and Northwest, and 
Texan cattle on the ranges and ranches of the Southwest. 
Western and Texan cattle are further distinguished as to the 
method of preparation for market, terms such as grassers, 
corn-fed or hay-fed Texan or western, Montana-Texans or 
Wyoming-Texans (Texan-cattle which have grazed on western 

I A 




ranges), Dakota natives (Dakota range cattle originating in 
Texas), etc., are frequently used in price quotations but with- 
out uniform practice and the distinctions between these classes 
are not sharp. Cattle are further classed according to sex and 
age. Thus the price quotations may be in terms of native 
steers, western corn-fed cows, etc. Any cattle, moreover, 
which are sold to feeders, stock growers, breeders or dairy- 
men for fattening or stocking purposes are known as "feed- 
ers" or "stockers." 

The various classes of cattle are sometimes, though not 
always, subdivided into grades of quality indicating difference 
as to weight, the amount of dressed beef obtainable from an 
animal of a given live weight, the quality of the dressed beef 
and the quality of the animal for canning, curing, export or 
other purposes. The grades usually recognized are fancy, 
prime, choice, good, medium, and rough. Thus the prices 
may be quoted in terms of choice western corn-fed steers, 
prime native steers, or any other combination of class and 

The cattle grades are not generally found in the purchase 
records of the packing concerns who are the principal buyers. 
The packers commonly record their purchases in terms of the 
classes mentioned above, the records of one packing plant 
showing as many as twenty-two combinations of classes.^ In 
giving orders to their cattle buyers, the packers and slaugh- 
terers also use terms such as "packers," "beef cattle," "butcher 

* U. S. Bureau of Corporation : The Beef Industry, p. 90 — the 
records of the Hammond Company at St. Joseph showing the follow- 
ing classes: 

12. , Texan steers 

13. Fed Texan 

14. Texan heifers 

15. Texan cows 

16. Stags 

17. Steers 

18. Cows 

19. Rangers 

20. Bange cows 

21. Hay fed 

22. Fed 


Native steers 


Yearlings, baby beef 


Branded natives 




Native heifers 




Colorado heifers 




Western steers 


Corn-fed westerns 


Fed westerns 


stock," "canners,'' "cutters,'' "strippers," %ulls," "calves,'' 
and "export," each term indicating a particular use of the 
animal for packing, local butcher, canning, curing, expoiivng 
or other purposes.^ 

The Grading of Wool 

Though much wool is purchased locally without being 
graded in any way, this staple is systematically classified and 
graded at the large central markets^ The jdomestic wools of 
the United States are divided into classes according to their 
geographical origin, the usual territorial groups being (1) 
Ohio, Pennsylvania, and West Virginia; (2) Michigan and 
New York; (3) Kentucky and similar districts; (4) Califor- 
nia; (5) Texas; (6) Oregon; (7) Montana, Wyoming and 
Idaho, the wool there grown being known as "territory" wool ; 
(8) Utah; (9) Nevada; and (10) "pulled" wool which is the 
short wool removed from the skins after slaughter and origi- 
nates mainly in the large packing centers. These territorial 
classes are further classified, according to the extent of their 
preparation for spinning, into "unwashed," "washed" and 
"scoured" wool.^ 

The various classes of domestic wool are variously divided 
in grades, in accordance with the relative amount of merino 
blood in the sheep, the coarseness or fineness of the wool fiber, 
the amount of foreign matter and grease or probable scouring 
percentage, the length of the fiber, their adaptation for comb- 
ing or carding, and the time and frequency of shearing. The 
various classes of eastern wools, although they are not graded 
the same in every case, are usually divided into the following 
grades: (1) "picklock" or wool from the pure Saxony merino 
sheep, (2) XXX or wool resulting from the first cross of the 
Saxony with the ordinary merino sheep, (3) XX or wool from 
the full-blooded merino, (4) X or f merino blood wool, (5) 

* The classification and grading of sheep and hogs differ in detail 
but are similar in principle, the usual classes and grades being 
quoted in the daily press. 

'See chap, x, p. 215. 

t '1 




^, f and i blood, indicating relative amounts of merino blood, 
(6) "fine delaine," or straight merino wool adapted to comb- 
ing and usually 2 J or more inches in length and (7) "braid" 
or coarse wool. The classes of western wool are variously 
graded in terms of numbers, terms of quality, adaptation for 
combing or carding ("staple'' or "clothing"), spring or fall 
clip, 12-, 8- or 6-months' clip, or growth in particular terri- 
torial regions. The grades of pulled wool are stated in terms 
of letters and quality. 

In the following table (No. XIII) of domestic and foreign 
wool classes and grades it should be noted that the relative 
prices of eastern wools are quoted on the washed or unwashed 
basis while those of western and pulled wools are quoted on 
the scoured basis. The table shows the classes and grades 
regularly in use in the Boston wool market. 

Boston Classification op Wools* 

Ohio, Pbnnstlvania and Wbst VmaiNiA 


XX & abv @ 27 

*& I blood 26 @ 26J 

Finedel @ 27 

i bid 25 @ 26 


Fn. unwshed 

Unmr'ble 23J 

Fine del 

ibid 24 

J&lbld 23* 

Michigan and New Yobk 

Kne unwashed 20 @ 21 

Finedel 21J @ 22J 

4 bid 

i&l bid. 



Kbntuckt and SimhiAB 

23 @ 24 ibid 

23 @ 23\ Braid cbg . 



fCAUFOBmA (Scoured Basis) 

Sp'gnorth'nfree&12mo. 48 @ 50 S'th, 6 and 8 mos 42 

Sp'g middle countries 45 @ 46 Fall free 43 

S^th, 12 mo 43 @ 44 Fall defect 35 

Carbonized 42 

Texas (Scoured Basis) 

Fine 12 mo 55 @ 57 Fine Fall 47 

Fine 8 mo 50 @ 52 Georgia 20 

Oregon (Scoured Basis) 

Staple, eastern No. 1 58 @ 60 Cloth. Eastern No. 2 49 

Staple, eastern. No. 2 55 @ 56 Val. No. 1 47 

Cloth, eastern No. 1 52 @ 53 Val. No. 2 44 

Val. No. 3 40 

@ 24 
@ 23i 

@ 23i 
@ 20 

@ 43 
@ 44 
@ 37 
@ 43 

@ 48 
@ 21 

@ 50 
@ 48 
@ 45 
@ 41 

1 Prices as on May 7, 1914, at Boston. Textile Manufacturers' Journal, May 9, 


Montana, Idaho and Wyoming (Scoured) 

Staple, fine.. 58 @ 60 Fine cloth'g. . ka 

@ 54 Fine Med .' .' .' 50 

Staple i bid .* .' .' .' .* .' .* .* .' ,' .' .' .' 53 


Utah (Scoured) 
54 @ 55 Fine Med , 

Colorado and New Mexico (Scoured) 
S°e- 53 @ 54 

go- J 49 @ 50 

N0.2 45 @ 4g 

N0.3 35 

No. 4 38 

Fine cloth'g 54 


Ertra 66 

AA 54 

Fine A .!!!.! 51 

A super .' .* 43 

B super 40 

Nevada (Scoured) 
@ 56 Finemed. 

@ 56 
@ 53 
@ 50 
@ 43 


_ Scoured 

C super 32 

Cbgs. fine " * 52 

Medium [[ 4g 

Coarse 45 

@ 56 
@ 53 

50 @ 52 

@ 36 
@ 34 

50 @ 52 

@ 36 
@ 53 
@ 50 
@ 46 


Australia (Scoured Basis) 
Victorian Combing: 

708 65 

648 61 

608 57 

56s-58s 52 




New Zealand: 











Washed 27 

Washed col 19 

Angora 1.5 

Awaasi 23 

Karadi 23 


White 19 

Colors 14 


Combing 17 

Wshd. cbg 25 

Wld. ball... 19 

Willowed 18 

Unwid 16 

Cordova .' 15 


Combing 25 


Autumn 20 

@ 66 
@ 63 
@ 59 
@ 53 
@ 47 
@ 42 
@ 37 

Montevideo (Greasy) 
Lincoln 0.^1 

tbid ::::::: ii* 

illS.^".:::::::: il 

ibid :::: s 

@ 24 
@ 26 
@ 27 
@ 29 
@ 30 

@ 50 
@ 46 
@ 42 
@ 39 
@ 37 
@ 36 
@ 35 

Buenos Ayrea — x-breds: 

P"coln @ 23i 

F^.M 25 @ 25* 

„ * /?'?••..•.•.. • Nominal 

English and Irish: *"*»«»* 

Shropshire 32 @ 33 

?H8sex 29 @ 30 

Irish hogs 30 @ 31 


@ 28 
@ 20 
@ 16 
@ 25 
@ 25 

@ 20 
@ 15 

@ 18 
@ 26 
@ 21 
@ 21 



@ 27 
@ 20} 


IstcHp 19 

2d clip 20 


Bijsk 24J 

Urga ., 23 

Manchuna 22 

Scotch hlk: 

Faced 18 

Camel's hair (Rus'n)V.! ! 21 
Servian skin wools 21 

East India: 

Gray ' 


Vickaneer 21 

^"a 30 

Kandahar 21 

Spring ;| 13J 

® 20 
@ 21 

@ 25| 


@ 20 
@ 25 
@ 23 

@ 14 

@ 24 
@ 33 
@ 23 
@ 15 


_ . . Domestic 

Combing 30 

Carding 23 


@ 33 
@ 27 

Turkey .^°!^... 38 

Cape 34 

@ 40 
@ 36 



Leaf Tobacco Grades 

Leaf tobacco and fruits are distinctive in that they are fre- 
quently graded by the growers before they are sold. Owing 
to this practice, fruit grading has unavoidably been described 
in Chapter XII, and tobacco grading has been briefly referred 
to in Chapter XI. 

As was previously mentioned the leaf tobacco trade recog- 
nizes distinct classes and types of leaf, the former being based 
upon its adaptation for a particular use, and the latter upon a 
combination of qualities such as color, strength, elasticity, 
body and flavor ^ or a particular method of curing the leaf. 
These types, however, are sorted into grades which represent 
varying degrees of excellence. As in the case of tobacco 
types, the properties considered in grading also include color, 
strength, elasticity, body and flavor, the difference being that 
the grader considers these properties in detail, and also in- 
cludes properties such as the perfection of the leaves, whether 
they are torn, worm-eaten, bruised, or damaged from contact 
with the soil, their shape, thickness and length, and the part 
of the stalk from which they are stripped. 

The following classification of the type known as bright 
yellow leaf when sold in the I/anville, Virginia, market may 
be regarded as typical : 

Wrappers.— 1. Common wrappers : lowest grade of wrapper 
and only a grade above a bright filler. 2. Medium wrapper: 
not uniform in color, dingy, or piebald, but of good form and 
quality. 3. Good wrapper : tobacco of heavy body, orange color, 
generally styled mahogany. 4. Fine wrapper : second grade of 
lemon color, but inferior to the fancy. 5. Fancy wrapper : fine, 
delicate fiber, silky, fresh lemon color, very leafy, perfect leaves', 
and the highest class made in assorting. 

Fillers.—l. Common: all of the inferior and nondescript 
grades. 2. Medium : good, rich lugs, and the dark leaves with 
good body. 3. Good: tips, and the better and brighter heavy 
lugs and short leaves with body. 4. Fine: all the brightest, 
best and richest leaves next below common wrapper, and gen- 
erally of a gray and cherry-red color. 

*Chap. xi, p. 223. 


Smokers. — 1. Lowest grade: worm-eaten and discolored. 2. 
Brown and short leaves. 3. Grade above four, and not so 
colory. 4. Best smooth lugs, which make the highest class of 

Cutters. — 1. Thin, papery leaves, thrown out from fine 
fillers when assorting; lowest grade. 2. Same grade as three, 
but not so colory. 3. Fine cutters, leafy and inferior leaves 
taken from stalk that produced the best wrappers. 

The number of grades differ widely for the various types 
of leaf tobacco produced and in different growing districts 
and markets. The grading may, moreover, be performed by 
different individuals — by the grower, the packer, jobber, ex- 
porter, public inspector, warehouseman or commissionman. 
It may be done by the grower in the first instance, later to be 
regraded by packers or other leaf buyers, and it may also be 
sold by the grower in the ungraded condition, later to be pre- 
pared, graded and packed by the buyers in such manner as 
they prefer or as their market requires. 


CowEN, W. S. "Grain Inspection in Illinois," The Annals of 

the American Academy of Political and Social Science 

(Sept., 1911), pp. 78-90. 
KiLLEBREW, J. B., and Myrick, H. Tobacco Leaf (1906). 
KiLLEBREw, J. p. "Tobacco Districts and Types," Bureau of 

Statistics (Department of Agriculture), Circular 18 


Marsh, A. R. "Cotton Exchanges and Their Economic Func- 
tions," The Annals of the American Academy of Politi- 
cal and Social Science (Sept., 1911), pp. 252-280. 

Merrill, J. C. Classification of Grain into Grades in The 
Annals of the American Academy of Political and So- 
cial Science (Sept., 1911), pp. 58-77. 

Waugh, F. a. Fruit Harvesting, Sorting and Marketing 

Illinois Public Utihties Commission: Rules Governing the 
Inspection of Grain in the State of Illinois, July 1 
1914 (1914). ' 

United States Bureau of Corporations: Cotton Exchanges 
Part I (1908). ' 






TJnited States Bureau of Corporations: The Beef Industry 

United States Bureau of Plant Industry: The Classification 

and Grading of Cotton, Farmers' Bulletin No. 691 (July 

10, 1914). 
United States Bureau of Labor Statistics: Wheat and Flour 

from Farmer to Consumer, Bulletin No. 130 (1914). 
United States Tariff Board: Wool and Wool Manufactures 

Textile Manufacturers' Journal (May 9, 1914), pp. 77-79; Ihid. 

(May 2, 1914). 
Grading rules of leading grain and produce exchanges (1913). 
Grain, cotton, livestock, textile, tobacco, dairy, fruit and gen- 
eral agricultural trade journals. 
Rules of New York and New Orleans cotton exchanges (1914). 
United States Cotton Futures Act (Aug. 18, 1914). 
United States Standard Apple Grading Act (Aug. 3, 1912). 

m. . 


A highly important part of the organization of American 
commerce, particularly of that phase which deals with the 
sale and distribution of the agricultural staples, is the ex- 
tensive machinery which has been developed for the collection 
and dissemination of crop reports. Carriers may be provided 
to transport the crops to market; local, central and retail 
markets, elevators and warehouses, exchanges and other mar- 
ket places to facilitate their storage, preparation and sale ; but 
without authentic current trade information the machinery 
of distribution could not but operate in a haphazard manner, 
and prices would seldom, if ever, be such as the actual or prob- 
able supply and demand naturally warrant. 

From the standpoint of their sources, crop reports may 
be divided into two groups: (1) those issued by the federal 
and state governments, and (2) those issued by private or- 
ganizations. The former include the reports published by the 
United States Department of Agriculture and the Census 
Office, and the latter those issued by certain trade journals, 
exchanges and private statistical organizations. In addition 
to these public crop reports, there are many strictly private 
reports which are obtained by large dealers, speculators or 
others, either directly or through private statistical sources, 
but, although such reports may at times exert a wide influence 
upon prices, they are not available to the multitude of pro- 
ducers, dealers and consumers who obtain much of their cur- 
rent trade information from such crop reports as are publicly 








Government Crop Reports 

Purpose of Government Crop Reports. — As early as 1863 
when the Department of Agriculture first appointed a stat- 
istician for the collection of agricultural statistics, and 1865 
when the first appropriation of $20,000 for the express pur- 
pose of issuixig crop reports was made, it was felt that there 
was a distinct need for systematically collected crop informa- 
tion and reports. Even prior to 1863 — during the period 
1839 to 1862 — certain crop statistics had been collected in the 
United States Patent Office. The crop-reporting service of 
the Department of Agriculture was for many years conducted 
by the Bureau of Statistics with an annual appropriation of 
about $225,000. Since June, 1914, it has been conducted by 
the Bureau of Crop Estimates, the appropriation for the fiscal 
year 1915 being $275,580. In justification of this expendi- 
ture the department points to the following purposes of its 
crop-reporting service : 

1. To provide reliable information to producers, con- 
sumers and dealers as to actual yields and conditions of crops 
outside of their own immediate community. 

2. To enable market centers to better balance supply 
against demand in defining what prices are warranted by 
natural conditions. 

3. To insure stability to the extent that it is permitted 
by natural conditions. 

4. To insure so certain an estimate that interested parties 
cannot discredit or swamp the government reports with their 
own private estimates. 

5. To enable producers to know the facts as to the prom- 
ise of prices so that they may not be led to sell at prices 
wrongfully quoted too low. 

6. To create confidence and certainty in general business 
conditions, to the extent that such conditions are influenced 
by the country's crops. 

7. To insure reports so frequently . and so sbon after 
changes have occurred in crop conditions or yields that specu' 
lative uncertainty may be reduced to a minimum. 



8. To provide information which will be of use to the 
carriers in the distribution of freight equipment before and 
during the crop-moving seasons. 

9. To assist farm implement, hardware and other manu- 
facturers, and wholesale, jobbing, and retail merchants in so 
far as the production and distribution of their wares may de- 
pend upon the farming population. 

Organization of Crop-reporting Service of Department of 
Agriculture. — The value of the crop-reporting service lies 
chiefly in the vastness of its sources of information, the disin- 
terested character of the Bureau of Crop Estimates, and the 
frequency and promptness with which the crop reports are 
issued. A brief outline of the organization and methods of 
the service will serve to show why its crop reports, although 
admittedly but estimates, are eagerly awaited by the agricul- 
tural trades and exert a widespread influence on the price of 
the agricultural staples. 

The monthly estimates of the bureau are based upon re- 
ports received from a huge number of correspondents located 
in all the farming and agricultural trade communities of the 
United States, and upon a smaller number of expert reports 
received from special field and state statistical agents. Its 
sources of crop information may be classified as follows : ^ 

1. Reports are received from about 32,000 township cor* 
respondents, who are farmers residing in the farming town- 
ships throughout the country. Their reports are made vol- 
untarily and without pay on printed blanks mailed to them by 
the Bureau of Crop Estimates. 

2. Similar voluntary reports are received from about 
2,800 principal county correspondents, who differ from the 
former in that they report for an entire county instead of 
their immediate vicinity or township. They make their re- 
port on printed blanks such as are shown in Forms No. 36 
and 37 and obtain their information from personal observa- 
tion and from voluntary reports received from two to four so- 
called "county aids" or assistants. 

* U. S. Bureau of Crop Estimates, Government Crop Eeports, Cir- 
cular 17, revised, pp. 14-15. 






■I -it 

i E 

3. The Bureau sends special blanks to a large list of 
special correspondents who are not necessarily farmers but 
who are nevertheless in a position to furnish valuable infor- 
mation. Thus in the grain trade it sends blanks requesting 
information on particular matters to about 30,000 millers 
elevatormen and warehousemen, grain dealers and grain car- 
riers, and in the cotton trade it similarly requests information 
from over 25,000 ginneries, 15,000 bankers, merchants, fac- 
tors, exporters and other buyers, warehousemen, southern cot- 
ton mills, and railroad agents. In making estimates of cotton 
yields, moreover, blanks requesting a statement of the amount 
ot their own particular output are sent direct to over 84 000 
cotton growers. ' 

4. The bureau regularly receives reports from a limited 
number of special field agents who are crop experts and are 
salaried employees of the government. Each of them travels 
throughout the farming district in which he is stationed, 
receives reports from correspondents on special blanks pro- 
vided for ihat purpose, and at stated times sends expert re- 
ports to the bureau separately for each state located within 
ills reporting district. 

5 The bureau also receives reports from so-called state 
statistical agents of whom there is one for each state or ^up 
of smaller states. They are persons who devote a part of 
their time for a small salary of from $300 to $1,100 per year 
to reporting for each state as a whole the same information as 
is asked of township and county correspondents. They re- 
ceive reports from about 15,000 voluntary local correspondents 
to whom they mail printed blanks, and they send the average 
for each state to the bureau as an independent estimate. 
Those m the larger states divide their state into about nine 
sections for each of which they compute a straight average, 
and then compute a weighted average for the entire state by 
assigning to each section a weight proportionate to its relative 

As the reports of township, county and special correspon- 
dents are received by the Bureau of Crop Estimates they are 
tabulated on large sheets so as to make them available to the 



Crop Reporting Board which makes the final estimates. In 
order to prevent a clerk from obtaining advance knowledge as 
to any particular state each sheet before the figures are added 
and averaged is cut into two parts so that no names or marks 
indicating the state to which the estimates belong remain, 
and the part containing the names of the counties and state is 
kept in a locked drawer by the chief of division. The reports 
from the special field agents and state statistical agents, which 
are of particular importance, are mailed to the Secretary of 
Agriculture in special envelopes or telegraphed to him in 
cipher to be kept in a locked safe until the morning of the 
report. The Crop Reporting Board before which all the 
necessary information concerning the speculative crops is 
finally placed consists of five experts including the Chief of 
the Bureau who is the permanent chairman and four others 
who differ from month to month. The board works in a 
locked room having no telephone or bther outside connection, 
and the final results are given simultaneously to the telegraph 
companies, reporters and all applicants to be conveyed to the 
exchanges, the press and to all interested parties. As is stated 
by one of the statisticians of the crop-reporting service :^ • 

When the board has assembled, the reports regarding the 
speculative crops from state and field agents are delivered 
by the Secretary, opened and tabulated. The figures by states, 
from the several classes of correspondents and agents, are placed 
in convenient parallel columns, a separate sheet being used 
for each separate crop or question. The board is thus provided 
with several estimates for each state and each crop, made inde- 
pendently by the respective classes of correspondents and agents 
of the bureau. Notes and comments of agents and weather re- 
ports are read. With all these data before the board, each in- 
dividual member computes independently, on a separate sheet, 
or final computation slip, his own estimate of the acreage, con- 
dition, yield, or whatever subject is being considered. The 
results obtained by each member are brought together and 
compared, state by state, and discussed by the board under the 

*N. C Murray: *'The Crop Reporting System,*' The Annals of 
the American Academy of Political and Social Science, Sept., 1911, p. 



supervision of the chairman, and the final figures for each state 
decided upon. The estimates by states, as finally determined 
by the board, are weighted by figures proportionate to thei 
relative importance, the results being a true weighted average 
for the United States for each subject. Other crops than wheat, 
corn, oats, and cotton are prepared in the same way except that 
the entire board does not review them. 

As quickly as the board determines upon the final figures 
by states and the averages for the United States have been 
obtained by expert computers, a summary is set up on a dupli- 
cating machine, and copies of the summary are given to the 


About two thousand copies of the summarized estimates 
are immediately mailed to newspapers and organized bodies 
interested in the crop reports. The final estimates are also 
immediately telegraphed to the Weather Bureau station di- 
rector of each state, who has copies printed and' mailed to all 
the local newspapers in the state. The details of the crop re- 
ports are, however, published a little later in a bulletin known 
as "The Monthly Crop Reporf ^ which is mailed gratis to any 
person upon request.^ 

Scope of Crop Reports of Department of Agriculture. 
—The crop reports cover a wide variety of information, the 
nature of which naturally varies in different seasons of the 
year. The principal returns, however, are those relating to : 

1. The acreage planted, which is stated by the bureau in 
terms of acres, but is computed from the estimated percen- 
tages reported by its agents and correspondents, the per- 
centages representing increases or decreases as compared with 
the previous year. 

2. The condition of the crops, which is reported alike by 
the bureau and its agents and correspondents in percentages 
based upon a normal crop of 100 per cent. 

3. The yield per acre, which is reported alike by the 
bureau and its agents and correspondents in terms of bushels, 
pounds or other units of qu antity per acre. 

^f, ' ^''^!'^V^^t.^^}f bulletin was known as the '^Crop Reporter,'' 
Outioo?' ^^' ^^^^' "^ ""^^ ^"^""^ ^' ''The Agricultu;al 



4. The total production, which is computed by multiply- 
ing the estimated yield per acre by the estimate acreage. 

5. The average prices per bushel, pound or other unit re- 
ceived by producers, which are compiled by the bureau from 
special reports received from its agents and correspondents. 

6. The total farm value of given crops, which is com- 
puted by multiplying the estimated production by the esti- 
mated average prices. 

7. The stocks on hand at given times, which are com- 
puted by the bureau from the reports received from its agents 
and correspondents who report this information in estimated 
percentages of the total crop harvested. 

8. The amounts shipped out of the county of production, 
which are computed in the same manner as the stocks on 
hand, and which indicate the estimated volume of grain, 
cotton or other crops reaching the country's markets. 

The reports dealing with wheat, corn, oats and cotton are 
issued in greatest detail and with the strictest regularity, but 
the crop-reporting service also covers a multitude of other 
farm commodities such as barley, rye, buckwheat, flaxseed, 
peas, rice, tobacco, grass seeds, potatoes, sweet potatoes, beet 
and cane sugar, cattle, hogs, sheep, horses and other livestock, 
hay, wool, and to a more limited extent fruits and vegetables. 

The crop reports of the Bureau of Crop Estimates are 
supplemented by the reports of the Weather Bureau, which 
is also in the Department of Agriculture. The Monthly 
Weather Review of this bureau contains concise statements as 
to the weather conditions throughout the crop-growing dis- 
tricts, the damage resulting from drought, excessive rainfall, 
frost and like conditions, temperature and precipitation with 
departure from normal values, etc., and at times exerts im- 
portant effects upon the prices of the agricultural staples. 

Returns of "United States Census Office. — Since the crop 
reports of the Department of Agriculture are based upon the 
judgments and opinions of its agents and correspondents the 
statistics contained in them, although of great value, are but 
estimates. It is desirable, therefore, that certain of its re- 
turns, particularly those concerning production and acreage. 








should occasionally be checked up by an actual canvass. This 
IS done by the Census Office, the returns of which are accepted 
by the Bureau of Crop Estimates as a basis for revising its 

The Census Office is especially active in reporting the cot- 
ton crop: (1) Beginning in June, it reports the estimated 
cotton acreage as of May 25th. (2) Thereafter it issues ten 
prehmmary bi-monthly, reports of the cotton ginned to speci- 
fied dates. (3) It issues monthly reports of cotton consumed, 
imported, exported and on hand and of the number of active 
cotton spindles, and (4) three reports of cotton-seed crushed 
and Imters produced. (5) In an annual bulletin entitled 
"Cotton Production'^ it reports in detail the total output of 
cotton and linters in the United States as reported by ginners 
and delinters, the total output of foreign cotton-producing 
countries, and the consumption, exports, imports and stock of 
cotton in the United States for specified periods. (6) It also 
issues an annual bulletin entitled "Supply and Distribution 
of Cotton'' showing the total supply of cotton in the United 
States for the year ending August thirty-first and its distribu- 
tion, together with statistics of spindles, consumption, stocks 
on hand, imports and exports, and certain statistics of spindles 
and cotton consumption and textile fiber production in foreign 
countries. The census returns are obtained mainly by actual 
canvass of the ginneries, delinters, dealers and merchants, 
warehousemen, cotton mills and other concerns handling cot- 
ton, each reporting on the volume of its own business. The 
returns of exports and imports used in its reports on supply 
and distribution are, however, compiled from reports of the 
Bureau of Foreign and Domestic Commerce of the Department 
of Commerce which obtains them from the customs records. 
Once in each decade the Census Office also makes a canvass 
of other agricultural crops, reporting for each a detailed state- 
ment of acreage, production, total farm value, average yield 
per acre, average farm value per bushel or other unit of quan- 
tity, and in some instances additional information. These 
census returns, particularly those of acreage and production, 
serve as a check upon the current crop reports of the Depart- 


ment of Agriculture, and are used by that department as a 
means of periodically revising its estimates. 

United States Bureau of Foreign and Domestic Commerce. 
—The official returns of the exports and imports of farm 
products— their value, volume, ports of shipment and receipt, 
countries to which exported and from which imported— are 
annually compiled and published in the United States Com- 
merce and Navigation Report by the .Bureau of Foreign and 
Domestic Commerce of the Department of Commerce. This 
bureau also publishes less detailed monthly returns of exports 
and imports in the Monthly Summary of Commerce and 
Finance. Its reports are compiled from the records of the 
United States Customs Office of the Treasury Department. 

State Reports.— The departments, bureaus, boards or com- 
missioners of agriculture, horticulture or dairying of many 
of the principal farming states compile and publish statistics 
of the agricultural industries within particular states. Their 
reports, however, are usually annual, and their scope is in 
most cases limited to acreage, crop production, livestock on 
farms, production of dairy products or other annual returns. 
The grain inspection departments, warehouse registrars, 
railroad and warehouse commissions or public service com- 
missions of some of the western agricultural states also pub- 
lish annual reports showing the number of cars or amount of 
grain publicly inspected, the receipts and shipments of grain 
to and from elevators and central grain markets, and other 
data arising in connection with their supervision of the grain 

Crop Reports of Private Organizations 

The Visible Supply. — Among the most important pri- 
vately collected crop statistics are those concerning the "vis- 
ible supply" of cotton and the cereals, i. e., the stocks of 
cotton and grain which have gone out of the hands of the 
producers and are in elevators, warehouses, vessels or other 
places where they are available for commercial purposes. The 
visible supply is of vast importance between harvesting sea- 





sons for it then constitutes the principal basis of the cotton 
and grain trades. The visible supply is due to various causes 
and performs the following important functions : 

1. Many growers because of inability to handle or finance 
their crop or for other reasons sell the bulk of their grain and 
cotton during or shortly after the harvesting season. 

2. The competition existing between primary markets 
and points of concentration tend to draw grain and cotton 
from the farms and local markets. 

3. Central elevators and warehousemen usually desire 
their elevators and warehouses to be filled, and the existence 
of these storage places makes possible a large visible supply. 

4. Future trading is particularly dependent upon the 
visible supply. 

5. The visible supply strengthens the consumers' posi- 
tions, by assuring them that certain quantities of cotton or 
grain are available to satisfy their needs. 

Visible supply returns are collected mainly by some of the 
large commercial journals through correspondents stationed 
at all the principal points of accumulation, and are currently 
compiled and published by them. The visible supply of cotton 
on August 28, 1914, for example, was reported by the Com- 
mercial and Financial Chronicle as is shown on page 303. 

Other Privately Collected Crop Information.— Various 
trade journals similarly collect and publish current statements 
showing the concentration of cotton and grain at interior 
points and seaboard ports, their shipment over various routes, 
their exportation and home consumption and other items 
showing their movement and distribution. Some likewise 
maintain corps of correspondents or otherwise estimate statis- 
tics of acreage, condition, and production similar to those col- 
lected by the Department of Agriculture, the private com- 
pilations often anticipating the government crop reports.^ 

Some of the large cotton and grain exchanges also are im- 

*Some of the principal journals and newspapers collecting crop 
reports are the New York Journal of Commerce, The New York Com- 
mercial, the Financial and Commercial Chronicle, Bradstreet^s, and 
The New Orleans Times-DemocraU 


The visible supply of cotton tonight, as made up by cable and telegraph, is as 
foUows F^regn stocks, as well as the afloat, are this week's returns, and consequently 
iSl foreign figures are brought down to Thursday evening. But to make the total the 
Complete figures for tonight (Friday), we add the item of exports from the Umted 
States, including in it the exports of Fnday only. 

August 28 

Stock at Liverpool bales 

Stock at London 

Stock at Manchester 

Total Great Britain . 

Stock at Hamburg 

Stock at Bremen 

Stock at Havre 

Stock at Marseilles ... 
Stock at Barcelona — 

Stock at Genoa 

Stock at Trieste 

Total Continental stocks , 

Total European stocks 

India cotton afloat for Europe 

Amer. cotton afloat for Europe .... 
Egypt, Brazil, &c., afloat for Europe. 

Stock in Alexandria. Egypt 

Stock in Bombay. India 

Stock in U. S. ports 

Stock in U. S. interior towns 

U. S. exports today 















Total visible supply. 














































Of the above, totals of American and other descriptions are as follows: 


















Liverpool stock. .bales 

Manchester stock 

Continental stock 

American afloat for Europe 

U. S. port stocks 

U. S. interior stocks 

U. S. exports today 

Total American 

East Indian, Brazil, &c. 

Liverpool stock 

London stock 

Manchester stock 

Continental stock 

India afloat for Europe 

Egypt, Brazil &c.. afloat 

Stock in Alexandria. Egypt 

Stock in Bombay, India 

Total East India, &c . 
Total American , 

Total visible supply. 























































• JE^timated 



• ! 


') ft 



The visible supply of American and Canadian Grain on 
August 22d, 1914, was similarly reported in the following 
form : 

The visible supply of grain, comprising the stocks in granary at principal 
m accumulation at lake and seaboard ports August 22, 1914, was as follows: 

















' In Thousands 

New York 




































































• ■ • • • 

















Philadelphia .... 


New Orleans... . 






afloat. . 





St. Louis 

Kansas City .... 

Indianapolis .... 


On Lakes 

On Canal & River 


Aug. 22 1914 
Aug. 15 1914 
Aug. 23 1913 
Aug. 24 1912 





































< ' In Thousands 


Ft. WilUam & Pt. 


Other Canadian . 









Aug. 22 1914 
Aug. 15 1914 
Aug. 23 1913 
Aug. 24 1912 






























In Thousands 












Aug. 22 1914 
Aug. 15 1914 
Aug. 23 1913 
Aug. 24 1912 

























portant reporting agencies. In the cotton trade the annual 
statistical reports of the secretaries of the New Orleans and 
New York exchanges, particularly those of the former, consti- 
tute valuable statements as to the actual movement and dis- 
tribution of that portion of the cotton crop which is "in 
sight" up to the time of their issue. Most of the grain ex- 
changes, moreover, compile and publish annual and current 
statistics covering their own dealings and the grain trade con- 
ducted at the centers in which they are situated, and some of 
them compile statistics covering larger areas and special items 
such as the visible supply and the movement and distribution 
of grain. 

Allied to the exchanges are important private reporting 
organizations, which provide them with detailed current sta- 
tistics concerning all conditions of interest to the trade. 
BroomhalFs Agency, for example, the reportorial staff of 
which extends throughout the important grain-growing coun- 
tries, acts as the reporting agency for all the largest grain 
exchanges in the world.^ 

Various trade organizations such as The National Wool 
Manufacturers Association and the Union Stock Yards Com- 
panies of the principal central livestock markets, compile 
valuable current statistics concerning the particular farm 
products in which they are interested. Similar also are the 

^ See Bruce D. Mudgett: ** Current Sources of Information in 
Produce Markets, * * The Annals of the American Academy of Political 
and Social Science, Sept., 1911, pp. 115-118. 

' m ' 







returns of the larger growers' cooperative marketing and ship- 
ping associations which obtain current reports of market con- 
ditions in accordance with which they consign or reconsign the 
products of their members. 

There are also many commission and hroTcerage houses, 
particularly in the grain trade, who "make a practice of can- 
vassing the intelligent opinion of men located in the grain 
belt for the purpose of estimating the conditions of the grain, 
the acreage, etc. A great many correspondents are in daily 
communication with their firms and are able to inform the 
latter of any circumstances of sufficient importance to justify 
a special investigation.^' * 

Finally there are numerous private crop experts who are in* 
the employ of large brokerage or commission houses or sell 
their information to subscribers. While some of them publish 
misleading reports for ulterior purposes, others are "men of 
mature judgment whose business it is to give disinterested 
and impartial advice on the growing crops and whose opinions 
can be depended upon to represent the facts as they know 
them.'' 1 "^ 

Allied to the crop statistics mentioned above are statistics 
of central market prices. The departments of Agriculture, 
Labor and Commerce publish various compilations of the 
prices paid at the central markets, but the main sources of 
current price statistics are the exchanges, trade journals and 
daily newspapers. The prices paid on the large exchanges 
are posted on bulletins, sent broadcast by telegraph, and regu- 
larly published by the daily press. 


MuDGETT, Bruce D. "Current Sources of Information in 
Produce Markets/' The Annals of the American Acad- 
emy of Political and Social Science (Sept., 1911). 

Murray, N. C. "The Crop Reporting System," Ibid. 

Secretary of New Orleans Cotton Exchange: Cotton Crop of 
United States (annual). 

> Ibid., pp. 118-119. 


Secretary of New York Cotton Exchange : Cotton Crop of the 

United States (annual). 
United States Bureau of Crop Estimates: Crop Reporting 

Systems and Sources of Crop Information in Foreign 

Countries, Farmers' Bulletin No. 581 (Mar. 18, 1914). 

The Monthly Crop Report (monthly since May, 1915). 

Government Crop Reports, Their Value, Scope, and 

Preparation, Circular 17, revised (Jan. 20, 1915). 
United States Census Office: Thirteenth Census Report on 

Agriculture, 1910 (1913), Vol. 5. 
The Collection of Statistics of Cotton, in BuUetm No. 

125 (1914), pp. 69-70. 

Monthly, bi-monthly and annual reports on cotton. 

United States Weather Bureau: Monthly Weather Review 

BroomhaU's Agency: The Corn Trade News (daily). 
Commercial and Financial Chronicle (weekly). 
New Orleans Times-Democrat (daily). 
New York Commercial (daily). 
New York Journal of Commerce (daily). 

(See also statistical reports listed on pp. 10, 11, 92, 93, 134, 
135, 200, 201, 221, 238, 257.) 



It is not the purpose of this chapter to describe property 
insurance as an industry, but rather to outline the purposes 
and extent to which the agricultural crops are protected by 
insurance throughout their passage from farmer to consumer. 
The fire and other property insurance business as such — its 
organization, manner of quoting rates, etc. — and the insur- 
ance of buildings, vessels and other trade facilities, are but 
indirectly related to the trade in farm products and have 
been fully described elsewhere.^ The insurance of farm com- 
modities, however, holds a direct and highly important posi- 
tion in commercial organization, the discussion of which may 
be classified into (1) rural crop insurance, (2) insurance as 
the basis of commodity loans, (3) the insurance of stored 
commodities, (4) the insurance of commodities in mills, fac- 
tories and mercantile establishments, (5) the insurance of 
commodities en route, and (6) insurance as the basis of 
financial settlement. 

EuRAL Crop Insurance 

Scope, — There is much lack of uniformity among farmers 
as regards the forms and extent of insurance carried by them. 
It is a common practice for them to insure their home, farm 
buildings, farm animals and machinery against loss by fire 
and lightning, but many neglect the insurance of their crops. 
Indeed there are many risks, such as grain pests, frosts and 
drought, which are seldom covered by insurance in the United 
States because of the great severity of such calamities when- 

^See S. S. Huebner: ** Property Insurance*^ and the bibliogra- 
phy contained therein. 




ever they occur and the relative absence of concerns which 

imderwrite such risks. 

The most common form of crop insurance is the insurance 
against loss by fire and lightning of grain, cotton, hay and 
other products after they have been harvested and stored on 
the farmer's premises or in other local storage places. Many 
farmers, particularly the small cotton growers, seldom protect 
themselves in this way, but the growers of large crops as well 
as some of less importance regularly protect their harvested 
crops until they finally dispose of them. 

In regions subject to heavy storms farmers in some cases 
protect their buildings as well as the crops stored in them by 
purchasing tornado, cyclone, and windstorm insurance.^ Sim- 
ilarly in the western grain states farmers sometimes protect 
their crops against loss from hailstorms by taking out hail 

insurance policies. 

Farm animals are frequently insured against loss from hre 
and lightning in many parts of the United States, but m 
those regions where livestock constitutes an important source 
of farm income livestock is also at times insured against loss 
from disease and accident. In case of the slaughter by federal 
or state veterinary inspectors of animals infected with con- 
tagious disease the owners are compensated jointly by the 
federal and state governments, but such compensation does 
not overcome the need for insurance, because it is based 
merely upon the animal's value for meat or other commercial 
purposes and not upon the real value of blooded stock. Much 
livestock, moreover, is lost otherwise than by order of public 
veterinary inspectors, and in the absence of insurance consti- 
tutes a complete loss to the owner. 

Livestock insurance in the United States— that is, insur- 
ance covering disease and accident— is provided mainly by 
special mutual or regularly incorporated livestock insurance 
companies, and has not been develop ed on a large scale. The 

^F L Hoffman: *' Windstorm and Tornado Insurance/' Spec- 
tator, vol. Ixvii, p. 272; A. T. Linnby: *^ Tornado Insurance '' ch. 65 
in H. P. Dunham: The Business of Insurance; G. H. Powell: Coop- 
eration in Agriculture, ch. 12. 





policies issued usually protect the owner against loss by death 
from accident, disease, fire, lightning and cyclone, including 
accidents such as a 'broken leg when found necessary by at- 
tending veterinary to destroy the animal's life." Some poli- 
cies, however, specifically exempt the insurance company in 
case of loss resulting from certain causes such as fire, flood, 
inundation, snowstorm or blizzard unless otherwise agreed in 
a special policy clause and additional premiums are paid. 
The policies, moreover, generally limit the insured value or 
amount recoverable to one-half or two-thirds of the actual 
value of the animals insured or to fixed maximum valuations, 
and prescribe a maximum age limit which varies with the 
kind of animal insured and the length of time during which 
protection is granted. In many instances the companies re- 
fuse to insure any livestock not kept in fenced-in pastures or 
other mclosures, thus eliminating range cattle. In spite of 
these precautions the risks of livestock insurance have proved 
so great that the premium rates charged have deterred the 
owners of common livestock from generally protecting them- 
selves with insurance. 

Livestock insurance in the United States has thus far been 
confined mainly to the insurance of horses and valuable 
blooded cattle. The number of outstanding policies on com- 
mon dairy or beef cattle has always been small, and common 
sheep and hogs are seldom insured against loss from disease or 
accident. Growers of "common stuff- even in case of fenced- 
in stock, have depended mainly upon such protection as is 
afforded by the regular fire and lightning insurance which 
they may carry, but relatively few insuring such stock against 
the greater risk of loss resulting from other accidents or from 

Sources ot Rural Insurance-Three groups of concerns 
provide most of the rural insurance. (1) At a recent date 
there were over 1,800 local mutual fire insurance companies 
in the United States, a large proportion of which are local 
cooperative farmers' associations. Similarly much of the 
farmers' tornado, cyclone, windstorm and livestock insurance 
IS obtained through local mutuals. The usual plan is to re- 




quire a small cash premium and in case their losses exceed 
their income to obtain the excess through a system of assess- 
ments. Although many local mutuals have failed, others 
have been successful in spite of the restricted volume of their 
business, lack of assets, and assessments, because the restricted 
area of their operation and personal acquaintance of their 
members tends to prevent overvaluation and to eliminate 
much of the moral hazard incident to property insurance. 

(2) Various state mutuals have from time to time been 
organized for rural insurance. They cover an entire state, 
portions of several states or larger areas, and have the advan- 
tage of coming more nearly within the law of average. They 
have, however, been less successful than the local mutuals, 
because their operation over wider areas increases the moral 
hazard, incurs greater competition with established old line 
companies, inferior supervision over the selection of risks, 
and, when many assessments are called, widespread with- 
drawal of policyholders.^ 

(3) Farm risks, particularly fire and lightning, but to 
some extent also livestock and other forms of rural risks, are 
also insured in regular incorporated joint-stock insurance 
companies. Many of these companies do an extensive business 
both in cities and country districts and operate throughout 

wide areas. 

(4) Farmers sometimes obtain insurance in the so-called 
Lloyd's associations consisting of "voluntary partnerships of 
groups of men in which each member agrees to hold himself 
individually liable for the payment of losses up to a specified 
amount." ^ 

Insubance as the Basis of Commodity Loans 

The purpose of property insurance in many instances is 
the desire to obtain credit. In basing loans upon mortgages 
the farmers are required to insure any farm buildings or 
equipment which may be pledge d, and insurance is similarly 

*S. S. Huebner: Property Insurance, pp. 60-61. 
* Ibid., p. 65. 





important when loans are based upon farm commodities. 
Farm loans secured by chattel mortgages on livestock some- 
times require that the animals be insured; and loans based 
upon harvested crops usually require insurance against fire 
losses. Growing crops are less commonly insured and are, 
therefore, accepted as collateral for but a small fraction of 
their full value. Loans on stored farm commodities, which 
are secured mainly at the elevators and warehouses of the 



This certifies that ha . . insur- 
ance by this company, under Policy No , Entry 

No to the amount of dollars 


, IJ. ., 

terminating day of 

at noon. 

Loss, if any, in conformity with the conditions of said 

policy, to be adjusted with 

and payable to o^jy ^^ 

presentation of and surrender of this certificate. 

Countersigned at Philadelphia, this day 

, Manager. 

Form 38 


central markets where vast quantities of grain, cotton, wool, 
leaf tobacco and other farm products are stored, are almost 
invariably dependent upon fire insurance, for the bankers, 
warehousemen or commissionmen refuse to accept the ele- 
vator or warehouse receipts as collateral unless fire insurance 
policies or certificates are attached. 

The insurance certificate, a copy of which is shown in 
Form No. 38, is a special device the main purposes of which 
are to facilitate commodity loans and financial settlement. 
A dealer may take out a general policy covering all the cotton 




or other commodity purchased or stored by him during a 
given period and then issue certificates against it covering 
whatever amounts are pledged for loans or sold for shipment, 
thereby immediately protecting the bank making the loans, or 
the consignee. The policyholder may either present a cer- 
tificate properly countersigned by an authorized insurance 
company official or issue it directly and request the company 
to later acknowledge its liability by letter, thus avoiding the 
delay and inconvenience incident to the issue of a new policy 
or the assignment of the interest in the policy each time a 
purchase or sale is made or a warehouse receipt is offered as 
collateral for a loan. Without either insurance certificates 
or policies the practice of loaning on farm commodities would 
be limited and the prevailing method of financing crops would 
be severely handicapped. 

The Insurance of Stored Commodities 

Farm produce stored in elevators or warehouses is almost 
invariably insured against loss by fire when used to obtain 
credit, but it is usually insured even when not pledged as 
collateral, for its owner likewise desires protection. Farmers 
may sometimes neglect their insurance, but the dealers, com- 
missionmen, jobbers, brokers and others who hold most of the 
products stored in the central markets are careful to avoid 
needless risks. The "Universal Schedule,^' for rating mer- 
cantile risks for example, contains a special "warehouse tar- 
iff,'^ quoting insurance rates for over 1,400 commodities stored 
in warehouses, including nearly all the agricultural products 
suitable for storage. Each warehouse is assigned a basis rate 
dependent upon varying factors such as the city in which it is 
situated, structural materials, proximity to water mains, va- 
riety of commodities accepted, rules regarding admittance of 
employees only, smoking, arrangement of commodities, run- 
ning aisles and the like. In addition each commodity is as- 
signed a special stock rate in accordance with its inherent 
desirability as a fire risk. Thus a given grain warehouse or 
elevator may be assigned a basis rate of 20 cents per $100, 

i i 



and grain stored in bulk an additional stock rate of 25 cents, 
making the total premium 20 plus 25 cents or 45 cents per 
$100 in contrast with a rate of 20 plus 40 or 60 cents on grain 
stored in cotton bags. 

Dealers frequently carry a general policy covering every 
bale of cotton, bushel of wheat or other farm commodities 
stored within a stated period, the insurance company being 
informed each night as to the amount of the da/s purchases 
and sales. Under this plan the dealer receives a premium bill 
from the company monthly or on agreed dates for the amount 
covered and the length of time it was insured. 

The sources of fire insurance in case of farm products 
stored in central elevators or warehouses are principally (1) 
the regular joint-stock fire insurance companies, many of 
which underwrite a huge volume of fire insurance risks of all 
kmds and operate over wide areas; (2) special mutual con- 
cerns such as the Grain Dealers' National of Indianapolis 
and the Grain Dealers' Mutual Fire Insurance Company of 
Minneapolis, and (3) local fire insurance mutuals operating 
within the cities in which warehouses are located. 

Insurance op Commodities m Mills, Factories and Mer- 
cantile Establishments 

Upon arrival at the mills, factories, wholesale or retail 
stores, auction warehouses or other places where the farm 
commodities are sold by actual inspection or are manufac- 
tured into finished products, they are again insured against 
loss by fire. Thus grain, cotton and wool are insured at flour 
and textile mills, and leaf tobacco at the tobacco factories 
and the auction warehouses of the South. 

The insurance rates are higher than on similar commodi- 
ties stored in elevators or warehouses because the fire risks 
are greater. The number of employees in mills, factories and 
stores is larger, many other persons frequent them, rules of 
conduct are more difficult of enforcement, and in some cases 
dust and other sources of inflammability are more likely to 




The principal sources of insurance at this stage in the life 
of the farm commodity are (1) the regular joint-stock fire 
insurance companies, (2) numerous so-called "factory 
mutuals" organized by factory and mill operators coopera- 
tively with a view to reducing the cost of insurance, and (3) 
the usual local mutuals organized to insure city properties. 

Insurance of Commodities En Route 

The extent to which farm products are insured while being 
transported depends largely upon the legal liability of the 
carrier, and this in turn differs widely according to whether 
they are being shipped by rail or water routes. 

Insurance af Railroad Shipments. — Farm products 
shipped by rail in interstate commerce are seldom insured 
en route because the railroads are liable for all ordinary forms 
of loss, damage and unreasonable delay, subject only to such 
exemptions as are authorized by common law, the federal 
statutes and by the "uniform'^ and ^^standard" bills of lad- 
ing.^ The railroads are free from complete liability only 
under certain conditions : They are not liable for loss, dam- 
age or delay caused (1) by "the act of God, the public enemy, 
quarantine, the authority of law," "strikes or riots"; (2) by 
the act or default of the shipper or owner, or by requests to 
hold the freight in transit made by the shipper, owner or 
other party entitled to make such a request; and (3) by de- 
fects or vice in the freight itself. They are not liable for (4) 
differences in the weights of grain, seed or other commodities 
caused by natural shrinkage or discrepancies in elevator 
weights; or (5) for "deviation or unavoidable delays" result 
ing from the compression of cotton bales. (6) Their liability 
in case of freight shipped on open cars at request of the ship- 
per is, '? the absence of negligence, limited to loss or damage 
by fire. (7) Forty-eight hours after notice of arrival has 
been duly sent or given their liability as carriers ceases, and 


Uniform *' bill issued by northern and western carriers, and 
' * standard ' ' by the southern carriers. 



thereafter they are liable for fire loss or damage only as ware- 
housemen, i. e., they are exempted except in case of gross 
negligence. (8) Their liability as carriers has in the past 
been modified by agreements, special contracts, freight classi- 
fications, or tariffs definitely limiting the maximum amounts 
collectible, and the courts have held such value limitations to 
be valid on interstate shipments and have ruled that shippers 
refusing to accept these conditions may be required to pay 
freight charges in excess of those stated in the tariffs.^ The 
so-called "Cummings Amendment" to the Interstate Com- 
merce Act, which became effective on June 3, 1915, will, how- 
ever, prevent interstate carriers from so limiting their liability 
in the future. It not only provides as did the "Carmack 
Amendment" of June 20, 1906, that the original carrier 
"shall be liable to the lawful holder of a receipt or bill of 
lading for any loss, damage or injury to property caused by it, 
or by any common carrier, railroad, or transportation com- 
pany to which such property may be delivered," and that "no 
contract, receipt, rule, regulation, or other limitation of any 
character whatsoever, shall exempt such common carrier" 
from liability, but in addition provides that the original car- 
rier shall be liable "for the full actual loss, damage, or injury 
to such property caused by it or by any connecting carrier'"; 
and the Interstate Commerce Commission has interpreted this 
to mean that the carriers may neither limit their liability to 
the shipper nor automatically raise their rates to compensate 
themselves for the increased risks which the act imposes upon 

Interstate livestock shipments have in the past usually 
been made in accordance with the terms of the so-called lim- 
ited liability or "uniform" livestock contract. In order to 
obtain the regular interstate livestock rates, the shippers were 
obliged to accept agreed maximum valuations, and to free the 
railways from liability as insurers and for loss, d-r age or de- 

* Adams Express Co. vs. Croninger, 226 U. S. 491 Hart vs. P. 
B. R., 112 U. S. 331. 

'In Be the Cummings Amendment, May 7, 1915, 33 I C C 

Reports 682. ' • v'- v. 



lay resulting from various causes. Such limitations will also 
after June 3, 1915, be prohibited by the Cummings amend- 
ment unless the courts should interpret the act favorably to 

the carriers. 

In some states the liability of the railroads in case of in- 
trastate shipments is similarly fixed by special state statutes 
prohibiting them from establishing agreed valuations or other- 
wise limiting their full liability as common carriers. 

The liability of the rail carriers was so extensive in the 
case of all ordinary agricultural commodities, except livestock 
shipped under the limited liability contract, that they were 
seldom insured while en route even before the above-mentioned 
amendment to the federal liability laws. Those shippers, 
moreover, who did not wish to accept the limited risks im- 
posed upon them in the uniform bill of lading could, upon 
payment of charges increased 10 per cent, above the regular 
freight rates, request the issue of a "special bill of lading' 
under the terms of which the railroads accepted full liability 
for loss,. damage and unreasonable delay caused by them. 
Livestock shippers were similarly able to protect themselves 
fuUy by paying increased rates, but sometimes preferred to 
insure their animals against transit losses in the livestock 
insurance companies formerly mentioned in connection with 

rural insurance. 

Insurance of Marine Cargoes.— The liability of steam- 
ship companies and other water carriers in case of loss or 
damage of freight cargoes differs widely from that of railroad 
carriers, and as a result a large marine insurance business has 
been developed. It is not intended to describe marine insur- 
ance as a business, but to discuss briefly those phases which 
directly concern the protection of cargoes and freight. The 
insurance of vessels and the working of marine insurance 
companies and of Lloyds and other marine underwriting as- 
sociations have been fully described elsewhere." 

The liability of carriers by water is so limited that the 
shipper cannot h old tkem responsible for any of the usual 
^See S. S. Huebner: Property Insurance, Part II— Marine In- 






risks encountered in marine shipping. Their bills of lading 
specify their freedom from liability in great detail, and the 
federal act of February, 1893, known as the Harter Act, stipu- 
lates that they are not liable except under certain specified 
conditions. The export bills of lading of ocean carriers are 
not uniform but the following liability clauses of the bill of 
lading issued by the American Line is typical: 

IT IS MUTUALLY AGREED that the steamer shall have 
liberty to sail with or without pilots; that the carrier shall 
have liberty to convey goods in craft or lighters to and from 
the steamer at the risk of the owners of the goods ; and, in case 
the steamer shall put into a port of refuge, or be prevented 
from any cause from proceeding in the ordinary course of 
her voyage, to transship the goods to their destination by any 
other steamer; that the carrier shall not be liable for loss or 
damage occasioned by fire from any cause or wheresoever oc- 
curring ; by barratry of the master or crew ; by enemies, pirates 
or robbers; by arrest or restraint of princes, rulers or people, 
riots, strikes, or stoppage of labor; by explosion, bursting of 
boilers, breakage of shafts, or any latent defect in hull, ma- 
chinery or appurtenances, or unseaworthiness of the steamer, 
whether existing at time of shipment, or at the beginning of the 
voyage, provided the owners have exercised due diligence to make 
the steamer seaworthy; by heating, frost, decay, putrefaction, 
rust, sweat, change of character, drainage, leakage, breakage, ver- 
min, or by explosion of any of the goods whether shipped with or 
without disclosure of their nature, or any loss or damage 
arising from the nature of the goods or the insufficiency of 
packages, nor for inland damage; nor for the obliteration, 
errors, insufficiency or absence of marks, numbers, address or 
description; nor for risk of craft, hulk or transshipment; nor 
for any loss or damage caused by the prolongation of the 
voyage, and that the carrier shall not be concluded as to cor- 
rectness of statements herein of quality, quantity, gauge, con- 
tents, weight and value. General Average payable according to 
York- Antwerp Rules. If the owner of the steamer shall have 
exercised due diligence to make said steamer in all respects 
seaworthy and properly manned, equipped and supplied, it is 
hereby agreed that in case of danger, damage or disaster re- 
sulting from fault or negligence of the pilot, master or crew in 
the navigation or management of the steamer, or from latent 
or other defects, or unseaworthiness of the steamer, whether, 



existing at time of shipment, or at the beginning of the voyage, 
but not discoverable by due diligence, the consignees or owners 
of the cargo shall not be exempted from liability for contribu- 
tion in General Average, or for any special charges incurred, 
but, with the shipowner, shall contribute in General Average, 
and shall pay such special charges, as if such danger, damage 
or disaster had not resulted from such fault, negligence, latent 
or other defects or unseaworthiness. 

IT IS ALSO MUTUALLY AGREED that this shipment 
is subject to all the terms and provisions of, and all the ex- 
emptions from liability contained in, the Act of Congress of 
the United States, approved on the 13th day of February, 1893, 
and entitled "An Act relating to the navigation of vessels, 


IT IS ALSO MUTUALLY AGREED that the value of 
each package receipted for as above does not exceed the sum 
of one hundred dollars unless otherwise stated herein, on which 
basis the rate of freight is adjusted. 

The Harter Act referred to in the bill of lading provides 
that the vessel owner is liable in case of loss or damage aris- 
ing from (1) "negligence, fault, or failure in proper loading, 
storage, custody, care, or property delivery"; (2) from fail- 
ure "to exercise due diligence, properly equip, man, provision 
and outfit" his vessel; (3) from failure to exercise due care 
in making his vessel "seaworthy and capable of performing 
her intended voyage." The vessel owner is not liable, how- 
ever, for losses resulting from the unseaworthy condition of a 
properly inspected vessel even should it later appear that it 
was unseaworthy before leaving port, nor for losses resulting 
from errors of navigation, provided reasonable care was taken 
in providing the vessel's officers and crew. 

The vessel owner being free from liability for loss result- 
ing from the principal risks encountered at sea, it is impor- 
tant that the shippers insure their cargoes. They may, more- 
over, find it desirable to insure prepaid or collectible freight 
moneys, for ocean bills of lading in many cases contain a 
clause to the effect "that freight prepaid will not be returned, 
goods lost or not lost," and another providing "that full 
ireight is payable on damaged or unsound goods." 



The perils or risks against which protection is granted in 
marine insurance policies may be grouped as follows: (1) 
So-called "perils of the sea"; (2) fire; (3) jettison, i. e., the 
sacrificing in time of need of a portion of the cargo or vessel 
property for the common safety of the remainder; (4) bar- 
ratry which in case of cargoes has reference mainly to theft by 
officers or crew; (5) losses resulting from men-of-war, ene- 
mies, pirates, rovers, thieves, reprisals, takings at sea, arrests, 
restraints, etc., which in present-day practice refers mainly 
to war risks; and (6) "all other perils, losses, and misfor- 
tunes that have or shall come to the hurt, detriment or dam- 
age of the vessel or cargo." 

The usual cargo and freight policy does not protect the 
shipper against all possible perils, for the last-mentioned 
clause is not all-inclusive. It is interpreted so as to include 
only such other perils as are similar to those especially stated 
in the preceding policy clauses. The general cargo policy 
does not relieve the shipper from losses due to an inherent 
defect of the commodities shipped or resulting from natural 
deterioration, or wear and tear. Cargo policies, moreover, 
usually provide that no insurance will be paid unless the loss 
or damage to a particular commodity exceeds a stated per- 
centage of its value. 

It is possible, however, upon payment of increased pre- 
mium rates demanded by the insurer, to attach special clauses 
to a marine policy, covering almost any conceivable peril, for 
"nowadays all sorts of clauses may be written into a policy of 
marine insurance, including loss from earthquakes, pilferage, 
and leakage of liquids ; protection on the wharf while awaiting 
shipment, delivery, or transshipment; breakage, risks from 
the manufacturers' plant by inland rail through by trans- 
oceanic vessel and interior transportation to the warehouse 
of the consignee, and even risk by mule-back transport over 
the Andes." ^ 

The losses which arise from the perils mentioned above 
may take various forms. (1) The loss may be a "total loss" 
either "actual" or "constructive." The former occurs when 

* B. O. Hough : Ocean Traffic and Trade, p. 205. 



the cargo is actually lost, completely destroyed, entirely re- 
moved from the possession of the owner, or so badly damaged 
as to be of practically no value. A constructive total loss of 
cargo occurs when the goods "fail to arrive at the port of 
destination, and when the cost of restoring any loss or damage 
and of forwarding the cargo to its final destmation, amounts 
to more than the goods are worth after thus being repaired 
and forwarded," or when they are so situated that the expense 
of saving them would amount to more than their value after 
the expenditure is incurred.^ 

(2) In contrast with total losses, a partial loss of cargo 
or freight may occur, such losses being settled either in ac- 
cordance with the "general average" or "particular average" 
rules. The maritime laws of nations provide that losses re- 
sulting from the voluntary and deliberate sacrifice of any 
interest for the common safety of the entire vessel, cargo and 
freight shall be prorated among all benefited interests, i. e., 
it shall be settled in accordance with the "general average" 
rule. When cargo, masts and rigging or other parts of ves- 
sels, for example, are thrown overboard, when the vessel is 
stranded, or, when in case of fire, water losses are suffered for 
the common good, all parties gaining by the sacrifice must 
bear a proportionate share of the loss incurred. 

(3) A partial loss of cargo or freight may also result 
from an accident as distinct from one resulting from an order 
given by the vessel's master, in which case the "particular 
average" rule is applied. Commodities may, for example, be 
damaged by coming in contact with sea water or they may be 
crushed during a storm. Such losses are not sustained for the 
common safety ; they concern none but those especially inter- 
ested in the damaged commodities and those alone are obliged 
to bear whatever loss or damage is incurred. Marine policies 
frequently do not cover such loss unless it exceeds an agreed 
percentage of its value. 

(4) A partial loss may also be declared as a result of 
salvage which is the amount granted by law and custom to 
third parties fo r the saving of life and property at sea. Such 

* S. S. Hiiebner : Property Insurance, p. 303. 



losses are apportioned among all the benefited interests as in 
case of general average. 

There are many different types of cargo and freight poll- 
cies, for there are many underwriting associations and com- 
panies and widely varying needs. Thus there are general 
''cargo/' 'lake cargo," "river cargo," "cotton," "freight," 
"war risk," etc., policies. A copy of a typical general cargo 
policy issued by an American company is reproduced in 
Form No. 39. 

Policies which specify the actual value or agreed value of 
the commodities insured are known as "valued" policies, and 
those which omit to do so, as "open" policies. Moreover, 
policies which specify the name of the vessel in which the 
commodities are transported are "named" policies, while those 
which do not specify a particular vessel are "floating" pol- 
icies. Those which cov^r a specified voyage are "voyage" 
policies, in contrast with the "time" policies which provide 
protection for a period of time. Policies may lastly be classi- 
fied as "interest" or "wager" policies, according to whether 
the insured has or has not a real insurable interest in the com- 
modities insured. The latter type of policy is not enforceable 
by law and its fulfillment depends upon the underwriters' 
honor, for it is one of the fundamental principles of insurance 
law that a policy must represent an insurable interest. 

As in the case of fire insurance it has become a common 
practice to issue marine insurance certificates against cargo . 
policies, so as to avoid delay and inconvenience and afford 
immediate protection to consignees. These certificates, which 
are similar to those issued in connection with fire insurance 
policies,^ may, moreover, be used when international settle- 
ments are made by means of documentary bills of exchange. 

The sourges of marine insurance in the United States in 
so far as they concern cargoes or freight which has been pre- 
paid or is collectible are threefold: (1) foreign marine or 
fire and marine insurance companies, which underwrite more 
than a majority of the total risks; (2) American companies. 

^See Form 38, p. 312. 



most of which conduct a fire as well as a marine insurance 
business, and in contrast with their foreign competitors em- 
phasize mainly their fire business; and (3) the Bureau of 



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Form 39 

War Risk Insurance of the United States Treasury Depart- 
ment, created by an Act of September 2, 1914, to insure the 
war risks of vessels, cargoes and freight moving under the 
American flag. The cargo policy which is reproduced in Form 
No. 40, shows how the bureau imderwrites war risks exclu- 


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sively, marine risks being left to private insurance concerns. 
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Form 40 

rule include the insurance of shippers' cargoes and prepaid or 
collectible freight. Shippers may obtain marine insurance 
direct from the insurance companies, through insurance 
agents or brokers who are located at all important ports. 



and in some cases the steamship lines will take out the neces- 
sary insurance for the shippers. 

Cargoes shipped in sailing vessels or in coastwise barges 
which take the outside or open sea route, and deck loads, are 
sometimes shipped without marine insurance or are pro- 
tected only against fire losses. The great majority of all car- 
goes, however, are regularly insured so as to reduce the ship- 
per's and consignees' risks to the minimum. In c.i.f. ship- 
ment the shipper bears the cost of the insurance, because he 
is in this case required to quote a net price which makes full 
allowance for '^cost, insurance and freight." In an f.o.b. 
(free on board) shipment, on the contrary the insurance cost 
falls upon the consignee. 

Insurance the Basis of Financial Settlement 

The function of insurance as the basis for financial settle- 
ment is in greatest evidence in the oversea trade because this 
trade is conducted over water routes and because the docu- 
mentary bill of exchange is the most widely used method of 
international settlement. Such bills of exchange are not ac- 
cepted unless they have attached to them an order bill of 
lading, an invoice and a marine insurance policy or certifi- 
cate. Other forms of international settlement are less di- 
rectly dependent upon marine insurance, yet the protection 
of the commodities shipped also affects the establishment of 
an open account or the issue of commercial and finance bills. 
Shippers would be far more apt to demand cash with their 
orders if the commodities to be shipped could not be insured 
against loss at sea. 

Marine insurance similarly affects domestic settlements in 
case of shipments via inland or coastwise water routes. Do- 
mestic settlements as a whole, however, depend less upon the 
insurance of the commodities bought and sold because the 
railroads who transport much the larger share are legally 
obliged to act as insurers en route and therefore obviate the 
need of attaching an insurance certificate to a domestic docu- 



mentary draft when settling for commodities shipped by raiL 
It is obvious, however, that the insurance of farm crops when 
stored or handled in warehouses, elevators, mercantile estab- 
lishments, mills, factories or elsewhere until finally disposed 
of, frequently has a bearing upon the arrangements for fi- 
nancial settlement. 


Bailey, L. H. Cyclopedia of Agriculture (1909), Vol. 4, p. 303. 

Gow, Wm. Marine Insurance — A Handbook (1909). 

Hoffman, F. L. Windstorm and Tornado Insurance (1908). 

Hough, B. O. Ocean Traffic and Trade (1914), chap. 10. 

HuEBNER, S. S. Property Insurance (1911), Part I, chaps. 
1, 19, and Part II. 

Johnson, E. R. Ocean and Inland Water Transportation 
(1906), chap. 14. 

Lumby, a. T. "Tornado Insurance," chap. 65 in H. P. Dun- 
ham: The Business of Insurance (1912). 

Powell, G. H. Cooperation in Agriculture (1913), chap. 12. 

Interstate Commerce Commission: In Re the Cummings 
Amendment, 33 I. C. C. Reports 682 (May 7, 1915). 

— '■ In the Matter of Bills of Lading, 29 I. C. C. Reports 417 

(Feb. 9, 1914). 

Wilson, A. J. The Business of Insurance (1904), chap. 6. 

Young, T. E. A Practical Exposition for the Student and 
Business Man (1903), chaps. 13, 14. 

United States Bureau of Corporations: Transportation by 
Water in the United States (1909), Part I, chap. 5. 

United States Bureau of Navigation : Navigation Laws of the 
United States (1911), Part 7. 

Policy contracts and rate cards of livestock, tornado, wind- 
storm, cyclone and casualty insurance companies. 

I ■■■ 



An important part of the organization of the trade in agri- 
cultural products is the necessary financial organization. The 
various steps in the financing of the country's crops may, for 
purposes of description, be subdivided into: (1) rural credit, 
(2) dealers' loans on produce, (3) the place of hedging in 
crop financing, (4) methods of financial settlement and (5) 
the seasonal flow of crop-moving funds. 

Rural Credit 

The farmers who produce the agricultural crops are re- 
quired to take the first step in financing them. Those who own 
their land and have sufficient resources to make necessary im- 
provements, provide needed equipment, and carry themselves 
from season to season without borrowing, can finance their 
crops from their own funds. There are many others, however, 
who are required to operate on credit. This is particularly 
true of tenant farmers, owners of farms only partly paid for or 
unimproved, and those who are financially weak, but there are 
also many progressive landowning farmers who borrow funds 
for the same reasons that men engaged in other industries 
operate on credit. It is estimated that the agricultural debt 
of the United States is no less than five billion dollars.^ 

Lon^-term Mortgage Credits. — Rural credit is of two 
quite distinct kinds which differ as regards length of time, 
purposes and sources. Long-term credits are required in or- 

*G. K. Holmes (Chief Division of Production and Distribution, 
U. S. Department of Agriculture) : * * The Sources of Rural Credit 
and Extent of Rural 1ndel)tednes8. " 




^ ! 



der to purchase farm lands, make permanent improvements 
and occasionally to equip farms. They are based upon 
farm mortgages and in 1910 they aggregated about $2,793,- 
000,000, or 55.9 per cent, of the country's total farm in- 

The principal source in the case of purchase money is the 
individual seller from whom the farmer purchased his land, 
while long-term credit to be used for other purposes is ob- 
tained mainly from local banks and trust companies not under 
the National Bank Act, neighboring farmers, individual 
lenders in nearby cities, and loan agencies representing insur- 
ance companies. There are also certain large outside land 
mortgage banks which make a business of issuing land de- 
bentures secured by farm mortgages. Eight states— Idaho, 
Indiana, Iowa, North Dakota, Oklahoma, Oregon, South Da- 
kota and Utah — make loans on farm mortgages, the loans be- 
ing limited, however, except in the case of Utah, to such sums 
as are part of an irreducible school fund.^ In 1914, more- 
over, the state of New York provided for the creation of a' 
'"land bank'' to be associated with local mortgage credit asso- 
ciations, and legislation providing for the organization of local 
credit unions has also been enacted in Massachusetts and 
Texas. Limited loans on farm mortgages have likewise been 
made by the Jewish Farmers' Cooperative Credit Union, and 
some rural loans have been made by the building and loan 
associations which have become so important in the purchase 
of city real estate. 

Short-term Rural Commercial Credits.— Distinct from 
these long-term mortgage loans are the short-term loans 
which are designed to carry the farmer from one crop sea- 
son to another, to enable him to hold his crops for favorable 
prices, and in some cases to purchase equipment. They are 
variously based upon crop liens, chattel mortgages, single 
or indorsed notes, unsecured book accounts, and miscellaneous 
farm property, warehouse receipts or securities. 

'Wisconsin State Board of Public Affairs (William M. Duffus)": 
Report on Agricultural Settlement and Farm Ownership '' Part I 
on State Loans to Farmers (1912). 



It was estimated that in 1910 farm loans aggregating $2,- 
207,000,000 were either unsecured or based upon collateral 
other than real-estate mortgages. Loans amounting to about 
$390,000,000 were based upon cotton crop liens, the cotton 
growers— particularly in the eastern cotton belt— pledging 
their growing crop with local merchants, banks or landlords 
and central cotton factors for advances of funds or supplies.^ 
Crop liens to the extent of $450,000,000 were similarly util- 
ized by growers of leaf tobacco, grain, fruit and other farm 
produce. Loans aggregating $700,000,000 were based upon 
chattel mortgages, that is, liens on livestock, farm machinery 
or other personal property of farmers pledged chiefly to local 
banks, local money lenders, and in the case of some "cattle 
loans" to central commissionmen. Open book accounts with 
local merchants provided short-term loans of supplies, ma- 
chinery, etc., aggregating $250,000,000; and other miscel- 
laneous farm loans amounting to $417,000,000 were also ob- 

Shartcomings of Farm Credits.— It is evident from the 
above statement that farm credit is by no means an insignifi- 
cant phase of crop financing in the United States. Yet there 
are many farmers who have experienced difficulties in obtain- 
ing the amount or kind of credit or. the favorable terms de- 
sired, thereby hampering to some extent the purchase, im- 
provement and equipment of farm lands and obliging many 
farmers to dispose of their crops at times when in their judg- 
ment the market prices are unfavorable. 

The specific obstacles most frequently complained of are 
various: (1) A fundamental difficulty has been the inade- 
quacy of the sources of farm credits. About six-sevenths of 
the country's farm loans are derive^ from strictly local and 
nearby sources such as local banks, general stores, neighboring 
farmers and local money lenders. Only about one-seventh of 
the credit is supplied from outside sources. The resources 
of the great banking and financial centers of the United 
States have entered the field of rural credit in but a limited 


^ See chap, v, p. 105. 



The national banks were until the enactment of the Fed- 
eral Reserve Act of 1913 prohibited from loaning on real es- 
tate or accepting as commercial paper the farmer's promissory 
notes running over ninety days. The first of these provisions 
debarred such banks almost entirely from long-term farm 
loans, and the second seriously limited their usefulness as 
sources of short-term credit because a loan for ninety days 
is usually of insufficient length for agricultural purposes. 
Commercial banks, moreover, aside from any legal require- 
ments, have preferred industries the wares of which move 
more constantly and can be turned over daily or on short 

The Act of 1913 remedies the legal situation in part by 
permitting national banks not situated in central reserve 
cities to make loans based on improved and unencumbered 
farms situated within their respective districts, for periods 
not exceeding five years and amounts not exceeding 50 per 
cent, of the farm's value, the total not to exceed 25 per cent, 
of the bank's capital and surplus or one-third of its time de- 
posits. It also permits reserve banks to rediscount notes, 
drafts and bills of exchange issued for farm purposes or based 
on livestock, provided that the maturity does not exceed 
six months or the total does not exceed in amount such per- 
centage of its capital as is to be fixed by the Federal Reserve 

(2) There has been some difficulty in obtaining farm 
credits of satisfactory term length. The returns of insur- 
ance companies, for example, show that in case of long-term 
loans the usual length of farm mortgages is five years, al- 
though some of them run for periods of seven to ten years. 
What many farmers desire for purposes of purchase and per- 
manent improvement is a loan running for a period of from 
20 to 35 years so as to extend practically from one farm gen- 
eration to another. Such credits are provided by some of the 
land mortgage companies which issue mortgage debentures, 
but such concerns have since the nineties been limited in num- 
ber. Those farmers, moreover, who desire short-time loans, 
often require a term exceeding 90 days and therefore find a 



poor market for their notes as compared with the commercial 
paper issued in industries not so dependent upon seasonal 


(3) In many parts of the United States the trend of dis- 
cussion concerning farm credits is directed principally toward 
the reduction of interest rates and other incidental costs. 
The average rate of interest on farm loans in the United 
States is about 7.75 per cent, ranging from an average of 5.8 
per cent, in New Hampshire to 11.58 per cent, in Oklahoma. 
Nominally they do not exceed the interest rates paid in cities, 
except in a minority of instances, but there are frequently in- 
cidental costs which result in the payment of exorbitant real 
interest charges. To circumvent the maximum interest rates 
established by law the sums stated in farmers' notes sometimes 
are made to exceed the amount actually loaned, or two notes 
each requiring the payment of interest may be drawn, one 
in favor of an outside loaning institution and the other in 
favor of the local agency, the notes being based respectively 
on a first and second mortgage. At times there are also 
commissions, abstract costs and renewal fees. In the 
case of open-book credits or loans of supplies or implements 
secured by crop liens, exorbitant usury is sometimes con- 
cealed in the prices which are charged for the wares so ad- 

(4) In case of crop liens an additional source of com- 
plaint, particularly in the cotton states, frequently arises from 
the growers' loss of control over the sale of his crops, as re- 
gards both method and time of sale. 

There has in recent years been much agitation in favor 
of various kinds of rural credit reforms, such as government 
or state loans, land debenture banks and cooperative credit 
banks, unions or associations. Detailed studies have been 
made of the cooperative credit plans of Germany, France, 
" Italy, Austro-Hungary, Russia, Switzerland and other for- 
eign countries.^ 

^See Lorenzoni: Outline of European Credit Systems; Herrick 
and Ingalls: Kural Credits; International Institute of Agriculture: 
Outline of European Cooperative Credit Systems. 


Dealers' Loans on Produce 


Having financed the farmers' crops before they are har- 
vested and before they have left his premises, a second phase 
of crop financing arises after they have been shipped to mar- 
ket. Again those farmers who have adequate resources of 
their own may, if they do not wish to sell at once, ship their 
crops to the markets, store them in warehouses or elevators 
and ultimately dispose of them without outside assistance. 
There are others, however, who cannot hold them without 
receiving loans or advances. Such farmers may store their 
grain, cotton, tobacco or other farm products in recognized 
warehouses, elevators, or other storage places and obtain 
credit either from the banks direct or through the warehouse- 
men or commissionmen based upon warehouse receipts or 
other evidence of crop ownership. At times there is complaint 
that farmers are not able to contract such loans as readily 
as produce dealers and some of the cotton unions of the 
South have endeavored to remedy the situation by providing 
cooperative warehouses and establishing definite banking con- 
nections, but the Department of Agriculture reported in 1912 
that on the whole but one-fourth of the farmers holding ware- 
house receipts use them for the purpose of obtaining credit. 
Much the larger portion of such loans or advances are nego- 
tiated by dealers and other crop purchasers, rather than by 
the growers, who in the majority of instances sell their crops 
to local buyers or ship them to central markets for immediate 
sale. Most of the farmers who wish to hold their crops for 
higher prices store them on their own premises; it is the 
exceptional farmer who stores them in central warehouses 
and uses them as collateral for loans. Dealers or other buyers 
on the contrary, in order to provide the immense amounts 
of cash required to buy the crops as they are offered by the 
growers, and who store large quantities, frequently pledge the 
stored products as collateral for loans. 

Loans on Grain.— Local dealers obtain such credit at 
times, but since they usually dispose of most of their holdings 



shortly after acquiring them, it devolves mainly upon the 
dealers at the central markets to contract loans of this kind. 
Vast quantities of grain are stored in the central elevators at 
the primary and seaboard markets by elevatormen and central 
grain dealers to be held until they are finally sold to domestic 
mills or exporters. Meanwhile much of this grain is pledged 
to banks as the basis for loans, the elevator or warehouse re- 
ceipts being accepted as evidence of ownership. This so- 
called ''grain paper," being based upon receipts which are 
carefully regulated by law in the western grain states, the 
entire trade conduct of the public elevators in fact being sub- 
ject to state and exchange control,^ is readily accepted in all 
ordinary times by many western banks. Indeed some western 
grain paper is also placed in the eastern banks of the United 
States and in Canadian banks through commercial paper 


Cotton Loans. — The practice of cotton buyers is similar 
to that of the central grain dealers, although the issue of 
cotton warehouse receipts is on the whole less subject to pub- 
lic or exchange regulation. The bases of cotton loans differ 
at the various points in its passage from grower to spinner. 
When bought at the gin, "gin tickets" issued by the ginning 
concerns may be pledged at banks for loans of funds; when 
held at a cotton compress, the "compress receipts" may be 
similarly used; and when stored in warehouses either at the 
various interior points of concentration, or at the cotton ports, 
the warehouse receipts become the basis for loans. When 
moving from gin to compress or compress to central market 
before final sale and shipment to spinner or importer, the 
railroad bill of lading may be substituted for the storage re- 
ceipts as evidence of ownership and be used as collateral for 
bank loans or advances from cotton factors. 

Leaf Tobacco and Wool Loans. — Similarly leaf tobacco, 
wool or other produce suitable for storage, is frequently 
pledged as collateral for loans or advances either directly with 
banks or indirectly with warehousemen or central commission- 
men. The proprietors of the auction leaf tobacco warehouses 

^See chap, iv, p. 65, 




of the South frequently make advances on stored leaf, they 
in turn obtaining loans from local banks, and during the 
"leaf tobacco war" of 1904-1905 the growers of some districts 
acting in union obtained loans from outside (New York) 
banks which accepted a lien on the tobacco. Wool stored at 
the large eastern and middle- western central wool markets 
is also pledged for bank loans by the central wool dealers, and 
in case of consigned wool is sometimes oifered by local dealers 
or growers to obtain advances from commission houses. 

Cold Storagfe Warehouse Loans. — Farm produce of all 
kinds suitable for storage and held in cold storage warehouses 
is at many central produce markets regularly pledged by cen- 
tral produce dealers, and occasionally by local shippers and 
growers, to obtain credit. The loans are sometimes obtained 
from the cold storage warehousemen who are in a better posi- 
tion to judge produce values and come into closer business 
contact with their clients than the banks. Their loaning 
function, moreover, is regarded as a convenience by both 
client and banker, and tends toward careful warehouse man- 
agement. The bankers to whom they in turn go for credit 
generally fall into three groups : those who readily loan on 
produce upon presentation of storage receipts, those who 
loan only after examination of the stored produce, and those 
who refuse to accept cold storage produce as the basis for 
credit or do so only sparingly. 

The Place of Hedging in Crop Financing 

The practice of hedging spot grain and cotton transac- 
tions on the speculative exchanges is a further step in the 
financing of the speculative crops.^ By enabling grain and 
cotton buyers to distribute the risk of price changes among 
produce speculators and insuring themselves against loss of 
trade profits, they are able to operate on narrower price mar- 
gins, pay the farmers relatively higher prices, enter into con- 
tracts calling for the delivery in the future of grain and cot- 

^ For description of hedging see chap, vii, p. 156. 



ton not possessed at the time, purchase almost unlimited quan- 
tities for storage, and strengthen their financial standing and 

The extent to which dealers can pledge grain or cotton 
in order to obtain loans from banks is greatly enhanced by 
the practice of hedging which reduces the danger of losses 
on the part of grain and cotton buyers, and by the existence 
of organized exchanges where large quantities of produce so 
pledged can if necessary be sold in the shortest possible time. 
Hedging similarly affects credit accommodations not based 
upon produce liens, for it generally reduces the risks of the 
grain and cotton trades. 

Methods of Financial Settlement 

Domestic Settlements. — Sales of farm products in the spot 
produce markets of the United States are settled in various 
ways: (1) Sales of grain, cotton or other products sold be- 
fore shipment may be settled by using a railroad order bill 
of lading. Such bills of lading are made out to the order of 
the shipper and require the consignee to present the properly 
indorsed original copy to the railroad before the latter may 
deliver the goods to him. The original or yellow copy may 
therefore be taken to the shipper's local bank and when ac- 
companied by an invoice, and in case of water transportation, 
by a marine insurance certificate, may be used as the basis 
for a draft drawn on the consignee or on another bank in 
which he has established a credit. The draft may call for 
payment at sight, or for periods of say 30, 60 or 90 days, and 
it may be drawn so as to require actual payment before de- 
livery of the indorsed bill of lading or "for acceptance." 
In the latter case the consignee is obliged to appear at the 
bank at destination and formally accept the draft in order 
to obtain the bill of lading but need not settle for the products 
until the draft matures. By using the order bill of lading 
the shipper may, however, obtain immediate payment for his 
shipment through regular banking channels. 





(2) In case of farm products consigned to a commission- 
man, broker or factor as is commonly done in the livestock 
and fruit trades and not infrequently in the grain, cotton, 
leaf tobacco, wool and other agricultural trades, the commis- 
sion concerns usually settle with the purchaser, and after de- 
ducting their commission or brokerage fee, transportation 
costs and any other shipping or trade costs chargeable to the 
products sold, send the shipper an itemized statement and a 
check or draft covering the balance due. 

(3) Shippers of farm staples may also run open-book ac- 
counts for buyers, particularly with concerns making frequent 
purchases, settlement being made periodically or upon pres- 
entation of bill. 

(4) The buyer of farm products may settle with the ship- 
per through the use of so-called commercial credit bills, which 
are drafts drawn by him on a bank as a commercial credit. 
Such drafts have no documents attached to them, but are 
merely drawn on the bank which has agreed to accept them 
for payment with the understanding that the customer will 
put the bank in funds before the draft falls due. The bank 
may extend such credit without collateral, or it may require 
security in the form of bills receivable, claims against cus- 
tomers, merchandise or similar collateral. 

(5) Settlement may also be made through "finance bills" 
which are drawn against stock or bond collateral deposited 
with a bank. Finance bills are more commonly used by banks 
than by merchants and are therefore often known as bankers' 
bills, but sometimes they are also used for purposes of com- 
mercial settlement. 

(6) Cash produce transactions may also be settled by re- 
quiring cash payment on delivery or cash with order. Offers 
of a discount may be made to induce cash payments, and 
sometimes it is requested that shipments shall be partly paid 
for by cash with order, the remainder, to be paid in accord- 
ance with some one of the preceding methods of settlement. 

Settlement of Agricultural Exports and Imports. — All the 
methods of settlement enumerated above are utilized also 
in the agricultural export and import trades, but in these 

trades the settlements based upon the export or import bills 
of lading are of paramount importance. The common practice 
is to draw a draft, known in the foreign trade as a bill of 
exchange, either upon a designated bank or upon the con- 
signee, the bill having attached to it the original ocean or 
rail-ocean bill of lading, an invoice showing the nature of the 
products, and a marine insurance certificate. Such drafts are 
known as documentary bills of exchange. When drawn upon 
a bank it means that the purchaser has established a "con- 
firmed bankers' credit" at some recognized bank in London, 
Paris, New York or other European or American banking 
center, which upon receipt of the bill with proper documents 
attached will either pay it on sight or accept it for payment 
upon maturity. Documentary bills of exchange drawn direct 
upon the consignee are less commonly used in the foreign 
trade, but they too may be drawn either for payment or for 
acceptance, the former bill requiring payment before delivery 
of the bill of lading and the latter permitting such delivery 
upon formal acceptance by the consignee who thereby obli- 
gates himself to settle the bill when it falls due at the end 
of say three or four months. Documentary bills of exchange 
are particularly adapted to the foreign trade for they reduce 
the element of risk to both shipper and consignee and enable 
the shipper to obtain his money as soon as the goods are for- 
warded. They are particularly useful as a safe method of 
extending credit to foreign buyers. 

It is customary to execute the bills of exchange and all 
attached documents in duplicate and to forward them in 
separate mails so as to minimize the risk of loss in transit. It 
is also important that the attached bills of lading should 
represent actual commodities to the amount specified in the 
bill and invoice. The use of fraudulent and worthless cotton 
bills of lading severely disrupted the financing of cotton ex- 
ports in 1911. 

A variation of the documentary bill drawn on a confirmed 
banker's credit is the so-called "Oriental letter of credit" 
which is sometimes used in the trade with far-eastern coun- 
tries. In this case the foreign merchant at the time he 



t ! 


orders the American products supplies a letter or statement 
which IS merely an advice to the New York bankers acting as 
correspondents of the far-eastern bankers that it will probably 
be safe to purchase drafts drawn on the Oriental firm in ques- 
tion up to certain amounts. No actual confirmed credit has, 
however, been established in this case and the drawer is not 
relieved from responsibility, for the advice is not an actual 
letter of credit.^ , 

Commercial credit bills are sometimes used by large ex- 
porting and importing firms. Foreign finance bills are also 
used particularly the so-called ^Tiouse bills" which are drawn 
by American firms on their own branches in Europe, but are 
now less freely drawn than in the past.^ Open accounts are 
run far less commonly than in the domestic trade. Ca^h pay- 
ment with order is seldom required for it is customary to 
grant credit in the foreign trade; and settlement through 
loreign commissionmen is unimportant because agricultural 
products are seldom shipped abroad on consignment. 

The Seasonal Flow of Crop-moving Funds 

Until recently one of the pronounced phases of crop finan- 
cing was the seasonal flow of bank funds— westward during 
the crop-moving months and eastward after the bulk of the 
crops had been sold. Vast quantities of cash are needed in 
the western grain states during the summer and fall months 
when cash is required to pay for the millions of bushels of 
gram which are then marketed by such farmers as do not 
hold their crops for sale in later months. Until the later 
nineties much of the money sent to the West for crop-movincr 
purposes consisted of eastern bank deposits, the western bank^s 
being unable to provide sufficient cash from their own re- 
sources. Later the western banking situation was greatly 
improved, and it was no longer necessary to the sam e extent 

2 ?■ ?; ^^""^^ '• ^^^^"^ '^^^^^ ^""^ Trade, p. 398. 
P. M. Warburg: *'The Discount System in Europe »' Natinnfll 
Monetary Commission Eeport, p. 13. ^ ' JNational 



to call upon the eastern banks for assistance. The seasonal 
flow of funds continued, however, for many western banks 
regularly sent a portion of their reserves eastward during the 
dull season, but called upon the eastern banks for its return 
during the crop-moving season. 

It is at this point that the grain and securities markets 
are interrelated, because many of the funds flowing eastward 
during the dull season are loaned to brokers and dealers in 
securities for the purchase of stocks and bonds. Many other 
factors affect the security market, but in so far as it depends 
upon the condition of the money market, the eastward flow 
of funds tends to stimulate security dealings and the west- 
ward flow to depress them. The interrelation was especially 
manifest during the financial panic of 1907 when a money 
stringency prevailed and many eastern banks refused to return 
to the western banks the surplus funds which they needed to 
finance the crops. Had the call of the western banks been 
heeded the prices of securities would have suffered even more 
than they did. As it was the price of grain was abnormally 
depressed because of lack of sufficient crop-moving funds, 
and for a time the grain trade was demoralized. 

In recent years the seasonal flow of bank funds has been 
less noticeable, alike because the western banks have been less 
willing to repeat their experience of 1907 and because it is now 
less necessary for them to seek outside sources of profit after 
the crops have been marketed, and less necessary to seek the 
assistance of eastern banks. The Federal Keserve Act of 1913 
will affect the seasonal flow of bank funds somewhat, for 
it provides that after thirty-six months from date of the 
establishment of a federal reserve bank in any district no por- 
tion of the legally required reserves of any bank organized 
under the Act may be held anywhere except in the bank's own 
vaults or in those of the federal reserve bank of the district 
in which it is situated. 




Arnold, J. J. "The Financing of Cotton," The Annals of the 
American Academy of Political and Social Science 
(Sept., 1911). 

"Financing Cotton," Journal of American Bankers' As- 
sociation (January, 1911). 

Ebersole, J. F. "Cattle Loan Companies," Journal of Political 
Economy (June, 1914). 

Haney, L. H. "Farm Credit Conditions in the Cotton States," 
American Economic Review (Mar., 1914), pp. 47-67. 

Herrick, M. T., and Ingalls, R. Rural Credits (1914). 

Holmes, G. K. (United States Department of Agriculture). 
"The Sources of Rural Credit and the Extent of Rural 
Indebtedness," publications of International Institute of 
Agriculture (April and May, 1913). 

Hough, B. O. Elementary Lessons in Exporting (1909), 
chap. X. 

Ocean Traffic & Trade (1914), chap. 15. 

Kemmerer, E. W. Agricultural Credit in the United States, 

American Economic Review (Dec, 1912). 
Patterson, E. M. Certain Changes in New York's Position as 

a Financial Center, Journal of Political Economy (June, 


Pope, J. E. Agricultural Credit in the United States, in 

Quarterly Journal of Economics (Aug., 1914). 
Powell, G. H. Cooperation in Agriculture (1913), chap. xi. 
Putnam, G. E. Farm Credits in Kansas, American Economic 

Review (Mar., 1915), pp. 27-37. 
Smith, Rollen E. Wheat Fields and Markets of the World 

(1908), Part II, chaps. 3, 4. 
Warburg, P. M. The Discount System in Europe, National 

Monetary Commission (1910). 
International Institute of Agriculture: Outline of European 

Cooperative Credit Systems (1912). 
Jewish Agricultural and Industrial Aid Society: Annual 


Sub-Committee of House Committee on Banking and Cur- 
rency: Hearings on Rural Credits, 63d Congress, 2d 
Sess. (1914). 

U. S. Senate: Compilation of Documents on Agricultural 
Credit Banks, 62d Congress, 2d Sess. (1912). 

Wisconsin State Board of Public Affairs (William M. Duf- 
fers) : Report on State Loans to Farmers (1912). 


No phase of the trade in farm products has in recent years 
caused more discussion than the rise in prices which products 
have undergone since the year 1896. In discussing the extent 
of this rise and its causes, and the factors which determine 
the prices of farm commodities it is advisable to bear in mind 
that the trade organization through which such commodities 
pass in their flow from farmer to consumer varies widely and 
that their prices change as they pass from the local to the 
primary or central markets of the interior and again as they 
pass to the final purchaser, who may be located in the interior, 
at the seaboard ports or other distant domestic markets, or in 
foreign countries. There is no uniform trade machinery, 
but as in the sale of other commodities it is possible to dis- 
tinguish at least three primary groups of prices for many 
of the great farm staples : wholesale or central market prices, 
growers' local prices and retail prices. 

Wholesale Prices 

Although the crops in many instances pass through the 
local markets before reaching the great central wholesale 
markets it is desirable to discuss wholesale prices first, as 
they constitute the basis alike of farm and retail prices. The 
wholesale prices are the standard in accordance with which 
all other agricultural commodity prices are gauged. It is at 
the wholesale markets that price fluctuations are primarily 

The wholesale markets for American farm products in 
most instances are threefold : the central or primary markets 




of the interior, the seaboard markets, and the foreign 
wholesale markets. Their relative importance as price es- 
tablishers varies, a limited group usually having a dominant 
position. In establishing the wholesale price for American 
grain, for example, the primary grain markets of the interior, 
particularly Chicago, are dominant ; in the cotton trade, Liver- 
pool, New Orleans and New York; in the domestic wool trade, 
Boston, New York, and Philadelphia; in the livestock trade 
the primary livestock centers of the Central West; while in 
the leaf tobacco, fruit and produce trades the importance of 
the various wholesale markets is more evenly balanced. The 
absolute prices of a given farm commodity differ at the vari- 
ous wholesale markets, but, except temporarily, such differ- 
ences merely reflect varying transportation, selling and other 
distribution costs, and in some cases import duties. Wholesale 
agricultural prices, especially in those trades where exchanges 
have been organized, are national, their entire level fluctuat- 
ing in relatively close harmony. The wholesale prices for 
grain and cotton, moreover, are practically world-wide be- 
cause of the extent of international trade in those staples, 
the well-organized condition of the world's trade in them, 
and the larger amount of organized speculation. To a 
limited extent there is also a world wholesale price for wool, 
leaf tobacco and livestock. 

Price Index Numbers of Agricultural Products. ^The 
standardized method of indicating the fluctuations of general 
price levels is in terms of index numbers based upon actual 
prices but expressed in percentages, and such index numbers 
have been computed for the wholesale prices of farm products 
from 1860 to the present time. Those for the year 1860 
to 1890 were compiled by the so-called Aldrich Committee ^ 
of the United States Senate, and those for later years by the 
United States Bureau of Labor Statistics, which, as shown in 
Table XIY, has readjusted all of them with the average for 
the period 1890 to 1899 as 100. 

The table shows that the wholesale prices of farm prod- 

' Senate Report No. 1394 (part 2), 2d session, 52d Cong., Finance 
Committee, 1893. 


ucts declined during the years 1892 to 1896, then advanced 
steadily until 1900, and thereafter fluctuated irregularly but 
gradually rose to an unusually high level. In 1913 they were 

50.7 per cent, higher than in 1890, 51.2 per cent, higher than 
in 1900, and 65.8 per cent, above the average prices of the 
decade 1890 to 1899. Not all the farm commodities included 
in these index numbers underwent the same increase in 
prices, but the advance in all the great staples was substan- 
tial. As compared with the average for the period 1890 to 
1899 the wholesale prices of hogs (heavy) in 1913 showed 
an increase of 89.6 per cent., of beef steers (choice to prime) 

67.8 per cent., upland cotton (middling) 64.8 per cent., 
corn 64.3 per cent., barley 53.1 per cent., oats 39.8 per 
cent., wheat 26.9 per cent., and sheep (western) 20.8 per 

Table XIV, moreover, shows that the wholesale prices of 
farm products have since 1896 increased to a far greater 
extent than the general level of all wholesale commodity prices 
combined and more rapidly than those of any of the other 
groups into which the bureau classifies commodity prices. 
As compared with the increase of 65.8 per cent, in the rela- 
tive prices of farm products in 1913 over the average for the 
decade 1890 to 1899, the general commodity price level in- 
creased 35.2 per cent., food prices 37.1 per cent., the prices 
of cloths and clothing 23.7 per cent., of fuel and lighting 42.2 
per cent., metals and implements 27.5 per cent., lumber and 
building materials 51.8 per cent., drugs and chemicals 24.1 
per cent., housefurnishings 18.1 per cent., and miscellaneous 
commodities 37.1 per cent. 

Index Numbers of General Wholesale Price Levels. 
— Since the unusual or special increase in farm commodity 
prices as compared with the increase in the general level of 
prices is especially significant because of its bearing upon 
the causes of price changes, it is well to establish this general 
price level as definitely as possible. The principal wholesale 
commodity price index numbers, in addition to those pub- 
lished by the Bureau of Labor Statistics for the United States, 
are those compiled by Bradstreefs and by Mr. Thomas Gib- 































































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son;^ for British wholesale markets by the London Econo- 
mist, and Mr. Augustus Sauerbeck; and for Canada by the 
Canadian Department of Agriculture. As is shown in Table 
XV these index numbers register respective advances between 
the years 1900 to 1913 of 22.4 per cent., 17 per cent., 31.4 per 
cent., 27.2 per cent., 13.3 per cent., and 25.2 per cent.^ This 
variation even as between the index numbers representing 
wholesale prices in the United States is due in part to the 
varying number of commodities and the wholesale markets 

Index Numbers of General Wholesale Commodity Prices 


of Labor 

Brad- * 








































Per Cent. 

Per Cent. 


Per Cent. 


Per Cent. 

* Continuation of those compiled by Dun's until 1907. 

' The Times Annalist publishes index numbers of wholesale food 
prices showing an increase during this period of 40.4 per cent. The 
Canadian index numbers are given because agricultural conditions 
in Canada resemble those in the United States in many respects; and 
the British index numbers are of value because the United Kingdom 
is the largest foreign market for American farm products, and be- 
cause they are not restricted by protective import duties. 


included in their computation. All of them indicate, however, 
that the general level of wholesale prices has advanced less 
rapidly than the wholesale prices of farm products. 

Wholesale Price Factors 

Though various distinct schools of thought have endeav- 
ored to attribute the general rise in prices, including agri- 
cultural as well as all other products, to some one cause, the 
preponderance of evidence tends to show that the rise in the 
wholesale price of farm commodities was due to a combina- 
tion of causes. 

1. The Gold Production Theory. — A portion of the rise 
has doubtless been due to the increase in the production of 
gold and in the use of credit. According to this conception 
in its most approved form prices are the resultant of the fol- 

MY + M^V^ 
. In this formula M 

lowing formula.^ P=- 


equals the amount of money in circulation in the United 
States; M^ the individual bank deposits subject to check; V 
and V^ their respective velocities of circulation; and T the 
total volume of trade expressed in dollars. Each of these 
price factors were, after laborious research, estimated by Pro- 
fessor Irving Fisher,^ and with the year 1909 as the basis 
the theoretical general prices for each of the years 1896 to 
1909 was computed. The parallel columns of Table XVI 
show how these calculated prices expressed in index numbers 
compared with the index numbers of actual prices, includ- 
ing the prices of securities and labor as well as of commodi- 

All of the factors in the accepted formula changed dur- 
ing the period 1896 to 1909 but those which changed to the 
greatest extent exerted the widest influence upon prices. The 

* Expounded and applied practically by Professors E. W. Kem- 
merer and Irving Fisher. 

*See Irving Fisher: The Purchasing Power of Money (Revised 
1913), pp. 276-318. 



amount of money in circulation in the United States was 
estimated to have increased from .87 to 1.63 billion dollars; 
individual deposits subject to check from 2.68 to 6.75 billions ; 
the velocity of money circulation from 19 to 22; and the 
velocity of check circulation from 36 to 54. The estimated 
volume of trade, (T), also increased from 209 to 399 billion 
dollars, but being the divisor the effect of this increase was 
to reduce prices. Of those factors which tend toward higher 

Calculated Index Numbers 



■ — 


MV + M^V* 































prices the greatest gains were in the amount of money in cir- 
culation and in the velocity of check transactions. As stated 
by Professor Fisher: 

The four price-raising causes may be arranged in the fol- 
lowing order of relative importance: 

Except for the growth of Y, prices would have been 1 per 
cent, lower than they were. 

Except for the growth of — , prices would have been 23 

per cent. lower than they were. 


Except for the growth of V*, prices would have been 28 

per cent, lower than they were. 
Except for the growth of M, prices would have been 45 
per cent, lower than they were. 
We conclude, therefore, that the growth of the velocity of 
circulation of money was a negligible factor in raising prices; 
that the relative growth of deposits and their velocity were 
large factors; and that the growth of money was the largest. 
The importance of the growth of money as a price-raising fac- 
tor was, according to the above figures, almost exactly double 
that of relative deposits and a little over 50 per cent, greater 
than that of their velocity of circulation. 

Since the growth of M was largely dependent upon the 
increased production of gold it is readily seen how this ex- 
planation of the increase in prices came to be known as the 
"gold theory of prices.^' Its staunchest advocates, however, 
do not claim that the increased gold output was solely re- 
sponsible for the rising price level, for their calculations indi- 
cate that a portion of the rise was due to the increased ve- 
locity of check transactions. It is estimated that over 90 per 
cent, of the business of the United States is performed by 
checks and less than 10 per cent, by money. Increased credit 
transactions as well as the increased gold output was there- 
fore among the foremost causes of the general increase in 

It is futile, however, to contend that the rise of the whole- 
sale prices of farm products or of any other special group 
of commodities was due solely to the causes considered in the 
preceding paragraphs. The above formula could at most 
serve to explain the increase in the general level of all prices 
combined. Yet the price of wheat, cotton or any other farm 
product or of any commodity whatsoever is to some extent a 
special price which is only partly dependent upon the factors 
m which establish a general level of prices. As was previously 

I stated the prices of farm products increased to a far greater 
m extent than the general level of all wholesale commodity prices 
M combined, and there is wide variation between individual farm 
m products as regards the extent to which their prices have ad- 





vanced. Similar variations also occur between other com- 
modities. While the index numbers of the Bureau of Labor 
Statistics show an advance of 66.5 per cent, in the price of 
eggs in 1913 as compared with the average for the decade 
1890 to 1899, lard 68.3 per cent., bacon 88.7 per cent., dressed 
beef 62.4 per cent., yellow pine sidings 74 per cent., and white 
pine boards (uppers) 113 per cent., the wholesale price of 
men's boots and shoes increased but 23.6 per cent., house- 
furnishings 18.1 per cent., and the wholesale price of some 
commodities such as sugar, news and wrapping paper de- 
clined. All of these fluctuations varied widely from the ad- 
vance in the general level of commodity prices. 

The unusual advance in the price of farm products was 
only partly due to increased gold production and the greater 
velocity of check transactions. Moreover, the exact- propor- 
tion of the advance chargeable to these factors is not known 
because the opportunities for error in the theoretical price 
calculations mentioned above are obvious. That the calcula- 
tions were made with exemplary care is admitted, yet some 
of the principal items are estimates rather than definitely 
known facts. It is doubtful, for example, whether any two 
statisticians, working independently, would arrive at substan- 
tially the same figure for ''total volume of trade" in the 
United States (T in the price formula). The increase in the 
general level of commodity prices, likewise, is not definitely 
established, the advances shown by such general index num- 
bers as have been compiled presenting appreciable variations. 
{See Table XY). 

2. The Forces of Supply and Demand.— An important 
cause of the special rise in the wholesale prices of farm com- 
modities is the changing relation between supply and demand. 
Both of these price factors are in turn subject to numerous 
fundamental underlying influences. 

The supply of farm products Is a definite price factor, 
but at different times different conceptions of it are opera- 
tive. The ruling consideration in the minds of the buyers 
and sellers at the wholesale markets may be the acreage 
planted, the condition of the growing crops, the visible supply 


in existence, or the total production of the year. The supply 
may, moreover, be derived from the farms of the United 
States, or partly from those of foreign agricultural countries. 
It is, likewise, not the actual supply of the moment which 
solely governs the prices of farm products, but also the judg- 
ment of the buyers and sellers at the ruling central markets 
as to the probable supply of the future. Traders are con- 
tinually discounting the future. Particularly is this the rule 
in the case of those commodities which are dealt in on well- 
organized exchanges and products which are not perishable. 
Whatever the ruling conception of supply may be at a 
given moment it ultimately depends upon the total available 
production of the crops, and this has in most cases declined 
relative to the country's needs. Production in the United 
States is especially important, for the foreign supplies of the 
grains, meat, animals and wool were until recently protected 
by import duties. From the statistics of production presented 
in earlier chapters it may be seen that during the years of 
greatest price increase the number of cattle, hogs and sheep 
in the United States declined, and that prior to the 
year 1914 the crops of corn, wheat, barley, potatoes and 
wool increa-sed less rapidly than the country's requirements. 
The crops of oats, rye, leaf tobacco, cotton and rice, on the 
other hand, continued to increase as compared with earlier 
years. It is significant that by far the greatest price, ad- 
vances occurred in the case of cattle and hogs, and that with 
the exception of cotton, prices advanced to the greatest extent 
in those crops where production made least headway. 

A multitude of reasons for the reduced rate of and the 
actual falling off in the production of some of the great crops 
have been assigned — increased land values, the movement of 
population into the cities, higher farm wages, decreased effi- 
ciency of farm laborers and a general increase in cost of 
agricultural production, the relative absence of intensive farm- 
ing in the United States, in some instances depleted fertility 
and inadequate use of fertilizers, in others the scarcity of 
available pastures, or in the wool trade the competition with 
foreign growers. Many special forces influencing production 




i i: 


f ! 

were mentioned in the earlier chapters dealing with particu- 
lar crops. Some writers attach particular importance to rain- 
fall, long extended cycles of rainfall being traced.^ These are 
to be distinguished from the direct effect of rainfall and 
other weather conditions, and of crop pests and livestock 
diseases upon the sudden advances or breaks in crop produc- 
tion, and consequently upon the sudden price fluctuations 
which often occur between crop seasons. 

The direct bearing of supply upon the wholesale prices 
of farm products is seen in the eagerness with which buyers 
and sellers await crop and weather reports, and the immediate 
rise or decline of prices when unfavorable or favorable reports 
of this kind are received. It may also be seen in the statis- 
tics of production and prices.^ In the absence of severe mone- 
tary stringency, war or other abnormal conditions, the prices 
of the great farm staples almost invariably rise when crops 
in the United States decline, and fall when crops increase. 
Indeed the prices of no other group of commodities are so 
closely dependent upon the increase or decrease of the supply 
as are those of farm products, for with the exception of cotton 
and wool they are least subject to the influence of general 
business conditions. The wholesale prices of many manu- 
factured articles and raw materials for use in manufacture fre- 
quently increase rather than decline when their supply in- 
creases because the production of such commodities is great- 
est when industry is prosperous and market conditions (de- 
mand) are favorable. When business is depressed the output 
of such products declines but their prices frequently fall 
rather than advance because market conditions are then un- 
favorable. The supply of farm products on the contrary is 
not similarly gauged in accordance with business prosperity, 
the aim of farmers invariably being the growth of a bumper 

It is impossible, however, to consider the effect of supply 

*H. L. Moore: Economic Cycles: Their Law and Cause, chaps. 
2 and 3. 

^See production and price statistics for years 1866 to 1911 in 
Moore: Economic Cycles, pp. 89 to 92. 


upon the price of farm products without at the same time 
considering the demand for them. Prices may rise even 
when a bumper crop is produced, and decline when the crop 
is small as compared with the preceding year, should the mar- 
ket demand for farm products suddenly expand in the former 
or shrink in the latter case. Production may increase rapidly 
but if at the same time there is an even greater growth in the 
demand for farm products their prices will advance. In 1914, 
for example, large crops of grain were raised in the United 
States and grain prices would normally have been lower than 
in the preceding year, yet record prices ruled largely because 
the outbreak of the European War created an unusual demand 
for American grains and flour. Similarly cotton production 
gradually increased after 1896, yet after 1902 cotton prices 
were higher than during the preceding twelve years, chiefly 
because the textile industries alike in the United States and 
abroad were rapidly expanding and created a demand which 
until the outbreak of the European War, with its depressino- 
effects upon European textile mills, maintained the average 
price of raw cotton above ten cents per pound. 

The market demand for the farm crops cannot be con- 
cretely expressed in the form of bushels, bales or pounds, but 
it IS nevertheless a very definite price factor dependent upon 
definite present or expected market conditions. Movements of 
population from the country to the city, the growth of popu- 
lation at home and abroad, the expansion or shrinkage of food 
requirements in food-importing countries, the development 
of the world's cotton and woolen mills, foreign tariff rates 
and inspection regulations, widespread wars which affect the 
demand for as well as the supply of the world's farm products, 
the state of business prosperity or depression, and the increas- 
ing or decreasing purchasing power of American and foreign 
consumers— all of these considerations which variously affect 
the ma: ::et demand for farm products are considered by the 
army of buyers and sellers whose bids and offers determine 
wholesale prices. As in the case of supply or production, the 
market demand for farm products is judged both from the 
standpoint of the present and of the future. The relation 

1 1 



between supply and demand is constantly being discounted 
in the great wholesale markets. 

The increase of gold production and the changing rela- 
tion between supply and demand have been principally re- 
sponsible for the increase in the general level of prices and 
for most of the special variations which have occurred in the 
wholesale prices of farm products. There are other factors, 
however, some of which bear an important relation to whole- 
sale prices. 

3. Speculation in Farm Products. — Ordinarily there are 
several conceptions of produce speculation — one referring to 
the practice of purchasing or holding farm products for a 
future rise in spot prices, a second to the making of contracts 
calling for the delivery or acceptance of spot produce at an 
agreed future time and price, and a third to the purchase and 
sale of "futures" on the speculative exchange. The first two 
forms of speculation are not confined to the wholesale markets, 
even the farmers not infrequently discounting or speculating 
on the future in these ways, and they are not confined to the 
trade in farm products. Such speculation is part and parcel 
of the process of fixing the wholesale prices of farm products 
in accordance with supply and demand. As was formerly 
stated the supply which determines prices is not alone the 
amount which reaches the markets at the moment, but also 
the total available crop and the probable supply of the future 
as shown by reports on acreage, crop conditions and weather 
influences, and the demand which determines prices is like- 
wise dependent upon probable future as well as present con- 
ditions. Such speculation is universal and its effect is not 
artificially to advance or depress prices but to adjust them 
in strict accordance with the conditions of supply and de- 
mand as judged by the trade. It tends to eliminate sharp 
fluctuations throughout the year and to base prices upon 
probable future as well as upon present conditions, rather 
than to arbitrarily raise or lower prices. 

It is against the third form of speculation, the dealing in 
cotton and grain "futures" on the speculative exchanges — 
that the charge of being an arbitrary price factor is most fre- 


quently made. The effects of this so-called organized specu- 
lation upon spot prices has been more fully discussed in Chap- 
ter VII. Briefly summarized its usual effects are not to ar- 
bitrarily raise or reduce the level of spot prices at the whole- 
sale markets, but (1) to fully discount the future and thereby 
reach the level warranted by fundamental conditions sooner 
than it would otherwise be reached; (2) to steady prices; (3) 
to enforce, so far as possible a world price for cotton and the 
speculative grains; and (4) to reduce the margin between 
wholesale prices and the prices received by the farmers or 
paid by millers, spinners or other consumers. 

While these are the normal effects of organized specula- 
tion it sometimes exerts a temporary influence upon spot 
prices not warranted by actual conditions of supply and de- 
mand. Usually, however, the manipulation, corners and sim- 
ilar practices here referred to are the result of produce gam- 
bling rather than of legitimate speculation. 

4. Manipulation and Comers.— While produce specula- 
tors ordinarily endeavor to profit by the skillful forecasting of 
natural market conditions, a gambling element sometimes is 
able to temporarily manipulate the price of "futures" arti- 
ficially, and since spot and future prices are interrelated such 
manipulation may artificially inflate or depress the whole- 
sale prices of cotton and grain. That its effects, however, 
are temporary has been repeatedly shown by the refusal of 
spot prices to blindly follow unduly inflated or depressed 
"future" prices. 

Corners likewise affect prices differently than legitimate 
speculation, their intent being to compel the payment of in- 
flated prices. Real corners of actual grain, cotton or other 
farm crops, however, are fortunately rarely attempted because 
the probabilities of failure are great and the amount of capital 
required stupendous. Speculative corners, consisting in the 
cornering of the futures maturing in a particular month, 
occur more frequently and are more readily carried out, but 
their price effects are short-lived because the victims make 
speedy settlement. Spot prices in the central markets of the 
United States as a whole, moreover, do not follow the inflated 

ll' • 



prices at which the futures of a particular month may sell 
during a speculative corner. The price effects of such a cor- 
ner are limited alike in extent and time. Its evils lie chiefly 
in the losses of the victims who are "caught short" and in the 
resulting mismanagement of legitimate hedging transactions. 

5. Combination and Consolidation. — Though it is charged 
at times that the rise of prices in the United States is due to 
the exercise of monopoly power by combinations of producers, 
the influence of such combination upon the wholesale prices 
of farm products has never been of widespread importance. 
Many cooperative associations of grain, fruit, vegetables and 
livestock growers have been formed, but their primary price 
influence has been upon growers' local prices and upon grow- 
ers' profits rather than upon the wholesale prices paid in the 
central markets. They have at times instilled competition 
into the local markets and they have enabled many growers to 
ship direct to the central markets, but they do not possess a 
monopoly power over wholesale prices and make no serious 
effort to inflate prices by withholding their crops from the 
market. Even the cooperative fruit exchanges which direct 
the shipment of fresh fruit have thus far endeavored to in- 
crease their members' profits by reducing distribution costs 
and gathering accurate information as to market needs rather 
than by endeavoring to dictate wholesale prices. Cooperative 
wool marketing has likewise had relatively little effect upon 
the prices paid at the leading central wool markets. 

The growers' unions which have sprung up in the cotton 
and leaf tobacco trades have, at times, had a somewhat 
greater influence on wholesale prices. The cotton unions have 
sometimes urged their members to adhere to suggested prices, 
to store their crop, restrict the output of cotton, and sell 
through cooperative warehouses. Their effect on wholesale 
cotton prices has sometimes been appreciable,^ but has on the 
whole been of relatively minor importance and has never 
approached that of monopoly power. The cotton unions have 
been most active in years of declining prices and have en- 
deavored to prevent severe depressions rather than to force 

^See chap, v, p. 108. 


the payment of increased prices. The leaf tobacco growers' 
associations of the southern states exerted an important in- 
fluence over prices during the years 1904 to 1908 when by 
storing their crops and restricting acreage they compelled 
the large tobacco manufacturers and exporters to pay a higher 
level of prices. 

While the increase in the prices of farm products has on 
the whole not been caused by growers' combinations, it is also 
true that few of them have suffered from combinations of 
buyers or industrial consolidations. There are no combina- 
tions of grain, cotton, wool, fruit or produce buyers or deal- 
ers and no flour, cotton, or woolen textile mill consolidations 
with a monopoly power sufficiently strong to permanently de- 
press the prices ruling in the wholesale markets. All of these 
industries and trades are competitive. The presence of a 
limited number of large meat-packing concerns at the cen- 
tral livestock markets of the West greatly reduces the amount 
of competition at these markets, yet it is significant that 
wholesale prices of livestock have advanced to a greater extent 
than those of grain or cotton. Leaf tobacco prices are the 
only important exception to the general rule that wholesale 
prices of farm products have not been seriously depressed by 
the restriction of competition. The leaf tobacco prices of the 
years 1899 to 1903 were unduly low, partly because the 
growth of the so-called "tobacco trust" diminished the com- 
petition among buyers. 

6. Cold Storage.— The storage of fruits, eggs, dairy prod- 
ucts and many varieties of farm produce in cold storage 
warehouses has become an important price factor in that it 
levels the prices of such perishable commodities from' one 
season to another. The storage of eggs, for example, creates 
a much increased market in the spring months when vast 
numbers of eggs especially suited to storage are produced, and 
consequently keeps their price level above what it would 
otherwise be. These cold storage eggs are gradually placed 
on the market during the summer and winter months, when 
the supply of fresh eggs is insufficient to meet requirements, 
and consequently keep the level of prices during these months 






lower than it would otherwise be. Since perishable farm 
products are seldom held in the cold storage warehouses 
longer than from one producing season to the next, even in 
those states where statutes limiting such storage to a definite 
period have not been enacted, it would seem that cold storage 
has not increased the average price of such commodities 
throughout the year but has tended to reduce fluctuations be- 
tween seasons and greatly increase both production and con- 
sumption. There is no convincing evidence that the increase 
in the prices of perishable farm products since 1896 was 
caused by the cold stgrage industry. 

7. Transportation Charges.— Railroad freight rates influ- 
ence the wholesale prices of farm products in various ways, 
(a) They frequently constitute an appreciable percentage of 
the total prices paid at the central markets, but their im- 
portance in this respect varies widely as between particular 
commodities and markets. Rates on grain, hay, fruit, vege- 
tables and eggs, for example, usually are important price 
factors, while those on cotton, leaf tobacco and livestock con- 
stitute but a small proportion of the prices realized at the 
central markets. The difference is in most instances due 
chiefly to the relatively low intrinsic value of the former 
group of products as compared with their bulk, and to the 
relatively high intrinsic value of the latter group. A rate 
of from 8 to 15 cents per 100 pounds of grain shipped from 
the West to Xew York, for instance, constitutes an important 
percentage of the New York price for a bushel of wheat or 
corn, but rates ranging from 25 to 55 cents per 100 pounds of 
cotton shipped from the larger central markets of the South 
to Boston constitute but a small fraction of the price paid for 
one pound of cotton. The entire railroad rate, however, is not 
always included in the wholesale price for farm products, for 
when large quantities move over water or rail-water routes, 
the higher all-rail rates can be included in the price only- 

in part. 

What has been said in connection with railroad freight 
charges applies also to ocean freight charges. Ocean freight 
rates are usually reflected in the difference between prices 


in the central markets of the United States and foreign coun- 
tries, but since many foreign markets obtain their supply of 
farm products only partly from the United States and the 
rates from all American shipping points are not uniform, the 
entire freight charge is not at all times reflected in price 
differences. There is, moreover, no uniform rule as to the 
incidence of export freight charges. The extent to which 
they are ultimately paid by the American exporter or pro- 
ducer or by the foreign purchaser depends largely upon their 
relative needs and varies at different times. In the case of 
agricultural exports the greatest portion of them is usually 
shifted to the foreign buyer either directly or in the prices 
paid by him, but when conditions of supply and demand are 
unfavorable to the United States the proportion paid by for- 
eign buyers declines. 

(b) Freight rates are also responsible for a portion of 
the difference between the prices ruling at one central market 
as compared with another. Thus, the grain prices at the sea- 
board markets are higher than those at the primary markets 
and the prices at the various primary markets differ some- 
what, partly because of differing freight charges.^ 

, (c) A general increase or decrease of freight charges on 
a given farm product is reflected in its prices. Freight 
charges were not, however, the cause of the increase in prices 
since 1896, for it is only recently that the rates of the east- 
ern trunk lines have been generally increased. The general 
level of freight sates declined until 1899-1900 and then re- 
mained practically stationary until the decision of the 5 per 
cent, rate case in 1914. There were individual changes prior 
to this decision, but not in sufficient numbers to affect the 
wholesale prices of farm products except at individual points. 
Individual rate increases differ from general increases in that 
they frequently affect the profits of buyers or sellers rather 
than wholesale prices. 

Railroad freight charges do not consist solely of freight 
rates, but also of special charges such as those which are at 
times paid for switching, storage and demurrage, loading and 

* See chap, iv, p. 91. 



' I 

unloading, elevator services, in-transit privileges, cotton com- 
pression, spotting cars, reconsignment and refrigeration. The 
practice of the carriers regarding most of these charges varies 
greatly. They may be absorbed by the carriers or shifted to 
the shipper; many special services may be performed free of 
charge at some points although subjected to charges at others ; 
and when special charges are collected there is no uniformity 
as to their amounts. Since wholesale markets and individual 
dealers are in many cases in competition with each other there 
is no general rule as to the inclusion of these charges in whole- 
sale prices. They are added in many instances, but at times 
their principal effect is upon the profits of the individual 
buyers or sellers from whom they are collected by the car- 

8. Commercial Costs.— The price effects of the trade costs 
incurred at the central markets such as commission or broker- 
age, insurance, inspection and grading, weighing, storage, 
yardage and feeding costs, are similar to those of freight 
charges. In so far as they are general in a given trade they 
are in part reflected in the general level of prices. Storage 
charges incurred at the primary markets, for example, usu- 
ally have a direct bearing upon grain prices in the later as 
compared with the earlier months of the crop season. The 
entrance of more dominant forces may, however, prevent the 
inclusion of such charges in prices. The extent to which 
they are reflected in the wholesale prices of farm products or 
are shifted so as to come directly out of the profits of local 
shippers or of the buyers and sellers at the central markets 
varies from time to time and at different markets. 

9. American Import Duties.— The recent increase in the 
wholesale prices of farm products was not directly due to the 
imposition of protective import duties, for these duties have 
not been increased since the enactment of the Dingley Act 
of 1S97. With the exception of temporary interruptions the 
policy of protecting farm products was one of long standing 
and prevailed during many periods of declining as well as of 
advancing prices. 

It is claimed, however, that by restricting imports the 


high duties on many farm products restricted the available 
supply and indirectly caused prices to increase. It is only 
in this indirect way that there could be any relation between 
the tariff on farm products and the recent advance in their 
prices. This possible effect of import duties, however, is 
greatly diminished in the case of many agricultural commodi- 
ties. The protective rates on grain, meat, animals, meat prod- 
ucts and eggs throughout the earlier years of their existence 
and until after the close of the nineteenth century had prac- 
tically no effect upon prices in the United States, for the pro- 
duction of a huge domestic surplus and the practical absence 
of large outside sources of supply made the importation of 
these products, even had they been on the free list, entirely 
improbable. Small quantities were imported in later years, 
yet the amounts imported even after the removal of the 
duties in 1913 have thus far been too small to affect 
prices throughout the United States. The effect of the tariff 
on the prices of fruits, domestic leaf tobacco and dairy prod- 
ucts has also been restricted, because the importation has 
been confined mainly, although not entirely, to special varie- 
ties not produced on a large scale in the United States and 
has always been small in comparison with the huge domestic 


The price effects of the tariff on imported wool and sugar 
have been greater, because these commodities come into more 
direct competition with the domestic products of the United 
States.^ The protection granted to manufacturing industries 
may also have had an indirect effect upon the prices of farm 
products in that they created a larger home demand for raw 
materials and foodstuffs by promoting home industries and 
the growth of a large industrial population. 

The price effects of the tariff rates at the present time and 
in the near future are conjectural because conditions have 
been abnormally disturbed by the European ^Yar. The Act 
of 1913, which is now in effect, will maintain the prices of 
domestic farm products even less than they were maintained 
by previous acts becaus e it places grain,, flour, livestock, meats 

^ See chap, xii, p. 207. 




and wool on the free list, reduces the rates on sugar and pro- 
vides for its reversion to the free list on May 1, 1916 ; reduces 
the rates on leaf tobacco and fruits; and generally "revises 
downward'^ the rates on manufactures. 

10. General Business Conditions.— One of the striking 
differences between farm commodities and raw "producers 
materials" or manufactures is that the prices of many of the 
former are less dependent upon general business prosperity 
than those of the latter. Raw cotton and wool are important 
exceptions because the demand for them depends directly 
upon the operation of the world's mills. The prices of the 
great food crops, however, and of leaf tobacco are influenced 
to a much smaller extent by industrial depression or prosper- 
ity, for food is a necessity and only the most dire depression 
greatly reduces the consumption of tobacco. 

Yet even the prices of foodstuffs are influenced somewhat 
by general business conditions. Industrial depression may so 
reduce the purchasing power of many consumers as to shift 
their demand from the more to the less expensive foods and 
cause them to practice food economies. Industrial prosperity 
on the contrary stimulates wastefulness, careless buying and 
an abnormal demand for high-grade foods. Business depres- 
sion may, moreover, be accompanied by a severe financial 
panic during which the dealers who usually accept almost 
unlimited quantities of the great farm staples are unable to 
finance their transactions. During the crop-moving season 
of 1907 the price of grain suffered an abrupt temporary de- 
cline because of the severe "money panic'' which caused a 
shortage of crop-moving funds. 

Growers' Local Prices 

The prices received by the growers of farm products sold 
in local markets are based directly upon the ruling wholesale 
prices of the central markets to which they are shipped by the 
local buyers. They are consequently subject to all the price 
influences which determine the central market prices, with the 

1 II 



exception that they fluctuate less frequently. They do not 
follow the central market prices with absolute precision, they 
are not subject to all the myriad of fluctuations which occur in 
the central markets throughout each business day; but every 
long extended advance or decline and every daily price change 
is reflected in the local markets, and in case of substantial 
price changes at the central markets, local buyers may read- 
just their prices several times in a single day. This relation- 
ship between local and central market prices is particularly 
close in the grain and cotton trades because the purchasing 
and distribution organization in these trades has been devel- 
oped to a high point of efficiency. It is somewhat less close 
in the local livestock, wool, leaf tobacco, fruit, produce and 
other agricultural trades, but the local prices of these com- 
modities are nevertheless based primarily upon the wholesale 
prices prevailing in the great central markets. 

In basing local prices upon central market prices, various 
deductions are made, the most important being (1) freight 
charges incurred in shipping the products to the central mar- 
kets, (2) operating costs of the local buyers including wages, 
insurance, weighing, inspection and cartage, (3) interest, 
rents, and any other local capital costs, and (4) an additional 
amount to yield a profit. Local grain buyers usually deduct 
from the primary market prices the freight charges incurred 
plus an additional number of cents per bushel to cover all 
other costs and yield a profit.^ The local cotton buyers of the 
large exporting or cotton brokerage concerns frequently are 
supplied with so-called "limits" which they deduct or add to 
the price at which cotton "futures" are selling on the New 
York, New Orleans or Liverpool exchanges.^ The methods 
of making the deductions from the central spot or contract 
prices varies, but the practice of basing local prices upon cen- 
tral market prices is the general rule except in unimportant 
local markets which have no regular trade connection with 
the outside world. 

The amounts deducted from the central market prices are 

^ See chap, iii, pp. 39, 40. 
'See chap, v, pp. Ill, 112. 


i I 



not absolutely inflexible, for they are to some extent subject 
to local influences. lu the local grain trade, for example, 
the number of cents per bushel deducted in addition to freight 
charges at a given local narket is influenced in part by the 
amount of competition btcween local buyers, the presence of a 
cooperative farmers' elevator, the ability of farmers to sell in 
a nearby rival market, the extent to which certain farmers are 
holding their grain in storage, and the intelligence of the 
farming community. Local buyers desire the maximum 
profit, but local influences affect the allowance for profit 
which they arc able to include in the amount subtracted from 
the central market price. 

The growers' cost of production does not directly deter- 
mine the prices of the great farm staples, because the farmers 
do not determine tlio prices which they receive. Their posi- 
tion is radically different from that of the huge industrial 
concerns some of which possess sufficient monopoly power to 
control in a large measure the prices which they receive for 
their wares. Agricultural prices are competitive, and are 
therefore influenced by the growers' costs of production only 
indirectly in that the failure to pay the farmers profitable 
prices will affect the amount of given products produced by 
them. Prices may fall below the cost basis temporarily and 
even for a succession of seasons, but low prices in the long 
run affect production or supnly by causing reduced acreage or 
a shift from one crop to another. 

Retail Prices 

Many of the principal agricultural commodities are not 
retailed in their crude condition and consequently retail prices 
are not regularly quoted except on the finished products into 
which they are converted.^ It is not intended to describe 
fully the manner in which the retail prices of these finished 
products are determined for they are more appropriately in- 
cluded in a volume dealing with the trade in manufactures. 

Some farm products, however, such as fruit, vegetables 

'See p. 16. 



and produce, dairy products, poultry, corn and oats, hay and 
straw are more commonly sold in the retail markets. Their 
retail prices are based primarily upon the wholesale prices 
of the central markets, various costs and an allowance for 
profit being added to the latter instead of being subtracted 
as in the case of growers' local prices. The retail costs which 
are so added include items such as interest and rents, retail 
selling expenses, insurance, delivery costs, and losses resulting 
from the decay of perishable produ'jts or insufficient demand 
for those of inferior quality. 

The computation is not, however, as exact as in the case 
of growers' prices because the retail costs incurred as well as 
the profits desired are in many instances interwoven with 
the aggregate costs and profits resulting from the handling of 
a large variety of other goods retailed in the same store. 

The retail prices of farm products are also affected by local 
or special influences. The keenness of retail competition, for 
example, affects the allowance for profit Vviiich can be added to 
the wholesale price in a given retail market. Differences in 
the purchasing power of retail customers, moreover, may 
cause retail price variations between different cities or even 
between different sections of the same city. While the whole- 
sale or central market prices throughout the United States 
fluctuate in relatively close harmony, there are no nation- 
wide retail prices of farm products. The margin between 
retail and wholesale prices of farm products varies to an 
amazing degree and the extent to which retail prices have ad- 
vanced varies widely in different parts of the country. The 
United States Bureau of Labor Statistics reports, for example, 
that the retail prices of potatoes in 1913 were 45.1 per cent, 
above the average for the decade 1890-1899 in the North At- 
lantic States, as compared with 46.1 per cent, in the South 
Atlantic states, 48.7 per cent, in the North Central states, 
49.1 per cent, in the South Central states, and 99.4 per cent, 
in the Western states ; and that the retail prices of poultry in 
these geographical divisions advanced 67.4 per cent., 59,5 per 
cent., 92.1 per cent., 87.6 per cent, and 34.9 per cent, re- 



The retail prices of crude farm products sometimes lag 
behind their wholesale prices temporarily, because the keen 
competition between the retailers may induce some of them 
to continue existing prices until stocks on hand are disposed 
of even though wholesale prices have meanwhile risen. It 
also happens at times that when the retail prices are raised 
they undergo a greater advance than the wholesale prices 
upon which they are based. The retail prices of fresh eggs in 
1913, for example, as reported by the United States Bureau of 
Labor Statistics, were 74.8 per cent, above the average for 
the decade 1890 to 1899, while the wholesale prices during 
the same period advanced 66.5 per cent. ; and the retail and 
wholesale prices of milk advanced 40.2 per cent, and 38.4 per 
cent, and of creamery butter 53.2 per cent, and about 42 per 
cent, respectively. The bureau reported the average retail 
prices of the fifteen principal foodstuffs, crude and prepared, 
to have advanced 67 per cent, as compared with an incr^se 
of 37.1 per cent, in the average wholesale prices of foods. 

The greater relative advance in retail prices was due prin- 
cipally to the increase in rents and in retail selling and de- 
livery costs. Retail costs were especially affected by the grow- 
ing practice of selling and delivering small lots. The entire 
system of retailing through small retail stores— appalling m 
number— has, moreover, proved expensive to the consumers. 
It has occasioned a wasteful duplication of facilities and sell- 
ing forces, and a margin between retail and wholesale prices 
sufficiently wide to provide a livelihood for a multitude of re- 
tailers each of whom, with some exceptions, is dependent 
upon a limited number of customers. While wholesale dealers 
of New York and Philadelphia usually add from 5 to 11 
per cent, to the prices which they pay for agricultural food 
products the average amount added to the wholesale dealers 
prices by the retail trade is reported to be at least 33 ^ per 
cent, in the former and 45 per cen t, in the latter market.^ 

^ Wholesale index number included from 53 to 57 foods. 

2 The Annals of the American Academy of Political and Social 
Science, July, 1913, pp. 151 and 205. For statistics of price margins 
see references marked with an * in th© accompanying bibliography. 



Babson, Roger W. Pactors Affecting Commodity Prices, in 

The Annals of the Ainerican Academy of Political and 

Social Science, Sept., 1911 (1911). 
Fisher, Irving. The Purchasing Power of Money (1913). 
Kemmerer, E. W. Money and Credit Instruments in Their 

Relation to General Prices (1907). 
*KiNG, C. L, Trolley Light Freight Service and Philadelphia 

Markets (Oct., 1912). 
Mitchell, W. C. Business Cycles (1913). 
Moore, Henry L. Economic Cycles: Their Law and Cause 

Paish, Sir George. Prices of Commodities in 1914, Journal 

of Royal Statistical Society (Mar., 1915). 
*SuLLrvAN, J. W. Markets for the People (1913). 
*Weld, L. D. H. Studies in the Marketing of Farm Products, 

University of Minnesota Studies in the Social Sciences, 

No. 4 (Feb., 1915). 
*!N'ew York Mayor's Market Commission: Report of (1913). 
*United States Bureau of Crop Estimates : The Monthly Crop 

Report (for current farm prices) (monthly since May, 

United States Bureau of Foreign and Domestic Commerce: 

Statistical Abstract of United States, 1913 (for price 

statistics) (1914). 
*United States Bureau of Labor Statistics: Butter Prices, 

from Producer to Consumer, Bulletin No. 164 (1915). 

Retail Prices 1890 to December, 1913 (1914). 

* Sugar Prices from Producer to Consumer, Bulletin No. 

121 (1913). 
Wheat and Flour Prices from Producer to Consumer, 


Bulletin No. 130 (1914). 

-Wholesale Prices 1890 to 1913 (1914). 

United States Department of Agriculture, Year Book (annual) 
Statistics of farm prices. 

*United States Industrial Commission, Distribution and Mar- 
keting of Farm Products (1901), Vol. 6. 
See also Statistical Sources listed on pp. 10, 11, 92, 93, 134, 

135^200, 201, 221, 238, 258. 

*Beferences designated by an * contain statistics of price margins* 

3.Vr^^- -'-- 







The methods of exporting and importing the principal 
agricultural commodities and the volume of the foreign trade 
in them were described in the preceding chapters. It is de- 
sirable, however, to discuss at greater length the entire for- 
eign trade of the United States in these as well as the many 
additional farm products which are exported and imported, 
the tendencies which are in course of development, and par- 
ticularly the foreign markets and market influences affecting 
the agricultural exports. The description of trade organiza- 
tion was confined strictly to the crops in the condition which 
they are brought to market from the country's farms and 
ranches — packing-house products, flour, canned goods and 
dairy products and similar commodities being excluded be- 
cause they are manufactures or semi-manufactures and are 
marketed differently from the raw farm products. Such pre- 
pared foodstuffs must, however, be included among the agri- 
cultural exports as their exportation has for many years borne 
a direct and important relation to the foreign as well as to 
the domestic trade in unprepared foodstuffs. 

Historical Development of Agricultueal Exports * 

Priar to the Treaty af Ghent. — Agricultural commodi- 
ties were among the first American exports, southern leaf to- 
bacco and rice and northern grain and provisions being 

*For detailed history of the foreign trade, including farm ex- 
ports, see Emory E. Johnson : History of Domestic and Foreign Com- 
merce of the United States, vol. ii. The chapters on the Foreign 
Trade from 1790 to 1913 are by the writer. 



shipped to England, Continental Europe and the West Indies 
throughout the entire colonial trade era. During the Revo- 
lutionary War and the years of the American Confederacy the 
agricultural export trade was in a depressed condition. With 
the exception of the years 1808 and 1814, however, foodstuffs 
were exported in even larger quantities during the period 
1790 to 1815 than during the colonial era. Agricultural pro- 
duction increased in the United States and the European wars 
and various European crop failures caused an unusual for- 
eign demand. Indeed the leadership in the northern states 
was shifted definitely from the fisheries to the agricultural 
foodstuffs — flour, wheat, corn and provisions. 

A new farm staple — cotton — moreover, assumed the lead- 
ership in the export trade of the southern states in 1803, the 
invention of the Whitney gin in 1793 soon making upland 
cotton the king of American exports. Meanwhile southern 
leaf tobacco .and rice continued to be shipped abroad in ap- 
preciable quantities. The dominant position of the agricul- 
tural exports was evident in 1807 when the country's foreign 
trade reached its maximum point prior to the Treaty of 
Ghent, 77 per cent, of the value of all domestic exports con- 
sisting of agricultural commodities. 

The Period 1815-1818.— Agricultural exports rose to an 
even higher level in the years 1815 to 1818, the surplus cot- 
ton, flour, wheat, tobacco, rice, provisions and Indian corn 
which had accumulated during the War of 1812 being released 
shortly after the declaration of peace. In 1818 farm com- 
modities valued at over $62,800,000 or 85 per cent, of the 
entire foreign trade in domestic products were shipped abroad. 
One-half of the total consisted of raw cotton, which had far 
outstripped all other agricultural exports. 

The Period 1818-1830.— The years from 1818 to 1830 
constituted an era of general trade recession during which 
the foreign trade in all the agricultural commodities as well 
as other domestic products, with the exception of cotton and 
manufactures, declined both in value and amount. So rapid, 
however, was the advance in cotton production that in spite 
of falling prices the exports of this staple increased slightly 






i J 




in value and from 87- to 298,000,000 pounds in actual vol- 
ume. , . . 

■Hie Period 1830-1836.— Then followed six years of gen- 
eral trade improvement. The opening of the Middle West 
increased the surplus in flour, grain and provisions, which 
improved transportation facilities made more readily avail- 
able, and the growth of cotton in the South continued to pro- 
gress. The agricultural exports rose to a value of over $90,- 
000,000 annually and comprised over 80 per cent, of all do- 
mestic exports. 

The Period 1836-1845.— This buoyancy, however, was 
short-lived, for a business panic developed in 1837 land the 
exports during the following decade fluctuated irregularly. 
None of the important agricultural exports increased with the 
one exception of cotton which was produced in such large 
quantities that its foreign shipments advanced from 424,000,- 
000 pounds in 1837 to 547,000,000 in 1846, although falling 
prices depressed their annual value by over $28,500,000. 

The Period 1846-1860.— The period 1846 to 1860 is known 
as the "golden era" of American commerce for the nation ex- 
perienced unprecedented prosperity and the foreign trade rose 
to a hitherto unknown level. Stimulated by the rapid settle- 
ment of the Mississippi Valley, by railroad construction, 
greatly increased farm production, the abandonment of the 
British corn laws, the severe food famine in Ireland, the 
crowing demand for outside foodstuffs in continental Euro- 
pean markets, national prosperity, and by the California gold 
discoveries with consequent favorable monetary conditions, the 
entire export trade and particularly the portion dependmg 
upon agriculture became unusually buoyant. Cotton exports 
increased from 1,667,000 bales in 1846 to 3,774,000 in 1860 
and from a value of $42,767,000 to $191,806,000. Western 
jrrain which had gradually entered the foreign trade during 
earlier years now for the first time became an item of real 
importance and caused a rapid rise in food exports. The 
maximum point in food shipments wa^ reached in 1857 when 
14,500,000 bushels of wheat, 10,250,000 bushels of corn and 
3 712.000 barrels of flour, and breadstuffs of all kinds valued 



at $55,500,000 were shipped abroad. Provisions, particularly 
western meat products, were exported to the value of $16,- 
600,000 in the closing year of the golden era, as also were 
nearly 168,500,000 pounds of leaf tobacco. The value of all 
agricultural exports combined rose from $108,600,000 in 1850 
to $260,280,000 in 1860, and even though non-agricultural in- 
dustries of many kinds were being established, continued to 
comprise over 80 per cent, of the country's entire export 

No sooner had the free trade policy been adopted in Great 
Britain during the year 1846 to 1849 than England became 
the great foreign market for American farm products, for 
England led in the cotton textile industry and then as in 
later years was more dependent upon outside foodstuffs than 
any other large country. But wider markets were also found 
in Ireland, Scotland, Germany, Holland, Norway, Sweden, 
Spain and Italy. Gold discoveries created an Australian mar- 
ket for foodstuffs, and food markets were also found in South 
America, Canada, Cuba, the British West Indies and Africa. 

The Civil War Era.— The Civil War resulted in the al- 
most complete destruction of the cotton-export trade and con- 
sequently reduced the agricultural exports during the period 
1861-1865. It is remarkable, however, that western flour, 
grain and provisions were exported in larger quantities than 
during the golden era. Though thousands of farmers had 
flocked to the colors the crops of the northern states under- 
went an amazing increase. Machinery, women and border 
state immigrants replaced the absent farmers; vessels flying 
foreign flags largely replaced the sorely pressed American 
merchant fleet ; and European crop failures caused an unusual 
foreign demand. England was forced to recognize that 
American foodstuffs as well as cotton had become an impor- 
tant international consideration. Leaf tobacco exports did not 

^ See U. S. Bureau of Statistics: Exports of Manufactures — 
1790-1902, Monthly Summary of Commerce and Finance, Apr., 1903, 
p. 3249; and U. S. Bureau of Foreign and Domestic Commerce, Sta- 
tistical Abstract (1913), p. 638. Statistics disagree slightly in differ- 
ent sources. 




increase but were well maintained, and the aggregate value 
of all agricultural exports, other than '=0"°"' «;d^«'°'=^J/'7 
less than $68,500,000 in 1860 to $130,800,000 m 1863^ A 
portion of this increase represented a rise in prices, but the 
Lports of flour, grain and provisions advanced in volume 

as well as in value. , , 

The Period 1865-1900.— Though farm commodities had 
long been the mainstay of the country's export trade, the hey- 
day of agricultural exports was reached during the seventies 
and eighties. Their upward course was subject to J-^^^^^^^ 
but their total value gradually advanced from $278,670,000 
in 1866 to $844,617,000 in 1900. 

The growth in exports was the direct result of the west- 
ward expansion of agriculture and the vast increase m the 
production of the grains, livestock, cotton, and leaf tobacco^ 
A great surplus was created which sought and found foreign 
markets, its exportation being stimulated by improvemens 
Trail, lake and ocean transportation facilities, m the method 
of international settlement and the establishment of accep ed 
export trade methods, by the growth and westward migra ion 
of flour mills and meat-packing plants, by reduced freight 
rates and by a brisk demand in Great Britain western Eu- 
rope and to some extent in non-European markets. 

'The principal feature of the period 1865 to 1^00 -as ^h^ 
unprecedented increase in the shipment of breadstuffs whi h 
superseded cotton as the largest group of American exports. 
By 1880 wheat exports had increased to 180,000 000 and corn 
exports to 99,500,000 bushels and the total value of all ex- 
ported breadstuffs to $288,000,000 or $76,500,000 in excess 
of the value of cotton exports. In the closing year of the 
century 186,097,000 bushels of wheat, 213,123,000 bushels of 
corn, and breadstuffs of all kinds valued at $262,744,000 were 
shipped abroad. The greatly enhanced importance of wheat 
and flour exports is emphasized in the large Proportion of the 
total crop which was shipped abroad. In 1860 but 9.2 per 
cent, of the wheat crop was exported, but in 1870 the export 
ratio rose to 20.7 per cent., in 1880 to 40.2 per cent., and 
from then until the end of the century it fluctuated from 25 


to 41J per cent., closing with 34 per cent, in 1900. The per 
cent, of the corn crop exported to foreign markets has always 
been smaller, but it, too, rose from ^ of 1 per cent, in 1860 to 
6f per cent, in 1880 and to 10-i% per cent, in 1900, the 
usual proportion since the early seventies varying from 2 to 5 
per cent, of the crop. 

Cotton exports were close rivals of breadstuffs. They 
lagged for a time after the close of the war, but by 1880 they 
had increased to 4,453,000 bales and by 1900 to 6,807,000 
valued at $241,833,000. A relatively smaller proportion of 
the crop was exported than during 1846 to 1860, when from 
71 to 86.8 per cent, was annually shipped abroad, because 
domestic mills were gradually entering the cotton trade; but 
as late as 1900, 66.8 per cent, of the crop was still being 
marketed in foreign countries. 

The exports of meat and meat products which had also 
made a beginning before the Civil War, advanced rapidly 
from a value of $35,000,000 in 1865 to $113,769,000 in 1880 
and to $175,227,000 in 1900, and soon came to rank as the 
third group of American exports. In the closing year of the 
century the total exports of all provisions including dairy 
products, were valued at nearly $184,500,000 and in addition 
the livestock industry exported live animals, principally cattle 
valued at $43,585,000. Leaf tobacco exports had, moreover, 
increased to 315,750,000 pounds valued at $27,600,000 and 
comprising nearly 39 per cent, of the entire tobacco crop. 

Agricultural commodities were the mainstay of the coun- 
try's export trade throughout the nineteenth century. It is 
remarkable that until the later eighties, though many other 
industries were entering the export trade, from 75 to 84 per 
cent, of the aggregate continued to spring from the farming 
industries. The agricultural proportion was somewhat lower 
during the remainder of the century, but remained above 70 
per cent, until 1895 and exceeded 61 per cent, in 1900. 



Eecent Developments of Agricultural Exports 

The total value of the farm products exported from the 
TJnited States since the close of the nineteenth century has 
undergone a further advance from $844,617,000 in 1900 to 
$1,123,000,000 in 1913, or nearly 33 per cent. Since agricul- 
tural export prices during this period have advanced fully 
30 per cent., it becomes evident that the real increase in vol- 
ume has been but slight. Agricultural exports have indeed 
undergone recent developments which are in marked contrast 
with those of previous years : 

1. Their dominant position in the country's export trade 
has been seriously undermined. Prior to the outbreak in 1914 
of the European War, which caused an unusual temporary ex- 
portation of foodstuffs, there was a steady decline in the rela- 
tion between the agricultural and total export trade from 65.2 
per cent, in 1901 to 46.2 per cent, in 1913.^ This is in sharp 
contrast with the relative growth of the exports of manu- 
factures and semi-manufactures during the same period from 
31.9 to 48.8 per cent. The relative shift from manufactures 
to farm products was due in part to the rise of a surplus out- 
put in various industries such as the iron and steel, agri- 
cultural implement, mineral oil, copper, lumber, cotton 
textile, leather, vehicle, chemical and rubber goods indus- 
tries, and in part to the relative decline in the country's food- 

2. The most pronounced development was the absolute 
decline in the value of food exports, in spite of rising prices, 
from nearly $545,603,000 in 1900 to $369,087,000 in 1910 
and $430,296,000 in 1914; and their relative decline from 
39.8 per cent, of the total export trade in 1900 to 18.6 per 
cent, in 19 14.^ Wheat exports including flour, fell from a 
maximum of over 234,773,000 bushels in 1902 to 145,500,000 
in 1914 and to a much lower point during various years of 

*U. S. Statistical Abstract (1913), p. 638. 

' Department of Commerce includes in these totals cottonseed 
oil, oilcake, wines, spirits and liquors, fish, etc., as well as the great 
agricultural crops. 


this period. Corn exports including cornmeal likewise de- 
clined from a maximum of 213,123,000 bushels in 1900 to 
10,700,000 in 1914. The value of total breadstuffs exported 
during the first decade of the twentieth century fell from 
$262,750,000 to $133,593,000 and to fourth rank as an Amer- 
ican export.^ The exports of provisions, including meat prod- 
ucts and dairy products, continued at a higher level but also 
declined from a value of $184,500,000 in 1900 to $130,633,000 
in 1910 and $146,250,000 in 1914. The number of cattle 
exported fell abruptly from over 397,000 in 1900 to 18,376 
in 1914. 

Not only did the food exports decline relative to the total 
export trade of the United States, but they declined relative 
to the production of foodstuffs. Wheat exports, for example, 
fell from 34 per cent, of the total crop in 1900 to 19J per 
cent, in 1913, and during the same period corn exports de- 
clined from lOy^^ per cent, to 1 -| per cent, of the corn 

3. Contrary to the decline in food shipments the great 
agricultural exports other than foodstuffs continued to in- 
crease. These exports, of which cotton and leaf tobacco are 
most important, constitute raw materials for use in foreign 
industries and have thus far been promoted by the continued 
existence of a great surplus. Eaw cotton regained its posi- 
tion as the king of exports. The volume of cotton exports 
sprang from 6,807,000 bales in 1900 to 10,675,000 in 1912 
and 9,165,000 in 1914, and their value from $241,833,000 in 
1900 to nearly $610,475,000 in 1914. Even though the Amer- 
ican cotton textile industry grew rapidly the proportion of the 
total cotton crop shipped abroad continued to fluctuate from 
63 to 72 per cent. 

Leaf tobacco exports similarly advanced from 315,750,000 
pounds in 1900 to 449,750,000 in 1914, and from a value of 
$29,400,000 to nearly $54,000,000. In late years an equiva- 
lent of over 40 per cent, of the total leaf tobacco crop was 
shipped to foreign markets. 

' Their total value in 1914 was $165,300,000. 
' Including flour and meal. 


Foreign Markets for Agricultural Exports 

European Markets. — The foreign markets for American 
farm products have long been confined primarily to Europe. 
The fall in the relative position of Europe in the total export 
trade of the United States from 74.6 per cent, in 1900 to 
59.9 per cent, in 1913 and 62.8 per cent, in 1914 was due 
chiefly to the shift from agricultural products to manufac- 
tures, less than 45 per cent, of the latter finding a market 
in the Old World even including the agricultural countries 
of eastern Europe. The position of Europe as the dominant 
foreign market for American farm products has declined 
somewhat in recent years, but it has since 1900 continued to 
absorb from 65 to 90 per cent, of the annual shipment of 
American raw foodstuffs, from 72 to 83 per cent, of the pre- 
pared food exports, and usually about 92 or 93 per cent, and 
80 or 85 per cent, respectively of the exports of raw cotton 
and leaf tobacco. 

A sharp contrast may be drawn between the countries of 
eastern and western Europe. The former produce a surplus 
of foodstuffs and their cotton textile industry although pro- 
gressing has thus far been of secondary importance, while the 
latter do not produce sufficient food to maintain their popula- 
tion, and have developed a huge textile industry which de- 
pends upon imported cotton. 

Great Britain has long been the leading foreign market 
for American foodstuffs, for as the United States Department 
of Agriculture reports, the United Kingdom produces but 27 
per cent, of her edible grains, 53 per cent, of her meats, 62 
per cent, of her dairy products and but 53 per cent, of her 
aggregate food requirements.^ Great Britain, moreover, has 
adhered to the free trade policy and has few inspection regu- 
lations which restrict food importation. 

Germany is also a great market for American food exports 
but is more restricted, for even though Germany is also an 

* Bureau of Crop Estimates: The Agricultural Outlook, Nov. 23, 
1914, pp. 20-22. 


industrial country and has a larger population than Great 
Britain the German Government has persistently encouraged 
the production of domestic foodstuffs wherever possible. Ger- 
many consequently produces about 82 per cent, of her edible 
grains, 93 per cent, of her meats, 92 per cent, of her dairy 
products and 88 per cent, of her aggregate food requirements. 
Not only does Germany produce large quantities of grain, 
flour and provisions which in the absence of intensive farming 
would be imported from the United States and other surplus 
countries, but also a huge potato crop which further restricts 
the need for food imports.^ Germany, moreover, levies pro- 
tective tariff duties on most food imports and enforces in- 
spection regulations which have restricted the importation of 
cattle and fresh meats. Wheat, flour, cured pork and beef 
products, lard, oleo and other American packing-house prod- 
ucts, however, were regularly shipped to Germany before the 
outbreak of the European War. 

France, Italy, the Netherlands, Belgium and all the re- 
maining countries of western Europe are also markets for 
American foodstuffs, for their domestic output of food is in- 
sufficient. The French market, however, is even more re- 
stricted than the German because France produces about 93 
per cent, of the edible grains needed by her population, 98 per 
cent, of her meats, more dairy products than are needed, and 
93 per cent, of her total food requirements. Holland and 
Belgium import relative large quantities both because their 
lack of sufficient domestic foods is greater than in either 
France or Germany and because a portion of the food ship- 
ments to Antwerp, Rotterdam and Amsterdam are reshipped 
to central European countries. 

The market for American foods in Eastern Europe is small 
because most of the countries in that section of Europe — par- 
ticularly Russia, Roumania and Bulgaria — produce a surplus 
which they export to Western Europe. This is also true of 
Austria-Hungary, the eastern half of the dual empire pro- 
ducing a surplus of farm products. 

*U. S. Bureau of Foreign and Domestic Commerce: Utilization 
of Potatoes in Europe (1914). 




Great Britain is also the principal foreign market for 
American raw cotton and leaf tobacco exports, taking nearly 
38 per cent, of each in 1914. Other important European mar- 
kets for American cotton are Germany, France, Italy, Spain 
and Belgium, which together import more cotton from the 
United States than Great Britain. This is also true in the 
case of leaf tobacco, Italy, France, Germany, Holland, Bel- 
gium and Spain being tobacco markets of long-standing im- 

Non-European Markets. — Though the agricultural ex- 
ports are dependent chiefly upon Europe, numerous non-Euro- 
pean markets are of appreciable importance. Since the close 
of the nineteenth century from 10 to 35 per cent, of the food 
exports in crude condition, and from 17 to 28 per cent, of the 
prepared food exports were shipped to non-European markets. 
Grains and flour are shipped chiefly to Canada, the Central 
American republics, Panama, Mexico, Cuba and other West 
Indian markets, Brazil, Chili, Peru, the northern countries 
of South America, Newfoundland and Labrador, Japan, the 
Philippines and South Africa. Limited quantities of raw 
cotton are similarly exported to Japan, Canada and Mexico; 
and leaf tobacco to Australasia, China, Canada, South Amer- 
ica and Africa. With the exception of industrial Japan, the 
importance of these countries in the American export trade, 
however, is principally as markets for non-agricultural 

Agricultural Export Trade Influences 

Favorable Influences. — The forces which influence the ex- 
portation of American farm products are both favorable and 
unfavorable. Those which tend to maintain the agricultural 
exports so far as possible are principally the following: 

1. The normal shortage of food production in Great Brit- 
ain and western Europe obliges those countries to import 
varying proportions of their grain, flour, meat products and 
in some instances dairy products. Their population is dense, 
their industries are mainly non-agricultural, and their out- 


side sources other than the United States — although increas- 
ing in importance — have thus far been insufficient. The 
needs of the non-European countries mentioned above (page 
378) are less pressing but they too may be expected to continue 
the importation of American foodstuffs in limited quantities. 

2. The cotton mills of Great Britain, Continental 
Europe, and to a less extent those of Japan and Canada, guar- 
antee a large foreign market for American cotton, for the 
United States produces over 60 per cent, of the world's com- 
mercial cotton crop and a much larger proportion of the 
varieties best suited to the manufacture of the finer grades of 
yarn and cloth. 

3. The foreign demand for American leaf tobacco, espe- 
cially in Great Britain, Italy, France, Germany, Holland, 
Belgium, Spain, Canada and Australasia, stimulates the ex- 
portation of the huge surplus of heavy shipping leaf which 
the domestic market is unable to absorb. 

4. The United States still produces a surplus of cotton, 
leaf tobacco, wheat, corn, flour and provisions which regu- 
larly seeks foreign markets. The surplus of grain, flour and 
meats has fallen rapidly since the close of the nineteenth cen- 
tury, but so long as it cannot be sold in the domestic market 
without depressing the price a portion of the crops will be 
sold abroad. 

5. The exportation of farm products to European mar- 
kets is favored by the well-organized condition of the trade 
mechanism necessary for international selling, shipping and 
financing. Great Britain and western Europe as well as the 
United States have organized exchanges, recognized markets, 
banks, export and import concerns, and improved railroad, 
steamship, warehouse, elevator and port facilities. 

6. Food and animal exports are occasionally stimulated 
by the abnormal needs of belligerent countries in times of 
war. The increased prices and unusual demand caused by 
the present European War for foodstuffs, horses and mules 
immediately increased the shipments to Great Britain and 
France and even to neutral countries such as Italy,^ Holland 

* Later became a belligerent. 




and the Scandinavian countries, some of whose outside sources 
of supply were restricted by foreign embargoes and the clos- 
ing of trade routes and some of whom were mobilizing their 
military forces and probably transshipping cargoes to bellig- 
erents. Direct food exports to Germany were on the contrary 
immediately restricted as a result of the interference with 
vessel movements by enemy warships, and the direct ship- 
ments of foodstuffs as well as of cotton and other agricultural 
exports to Germany ceased as a result of the issue and en- 
forcement of the British orders in council of February 2, and 

March 1, 1915. 

Unfavorable Influences. — The agricultural export trade 
has also in recent years been confronted by serious obstacles. 
(1) The greatly increased home needs for grain, flour, live- 
stock and meat products coupled with a relatively slow in- 
crease, and in some instances a decline in food production, has 
been chiefly responsible for the decrease in food exports. Cot- 
ton and leaf tobacco exports have thus far maintained an im- 
portant relation to their respective crops, yet should the textile 
and tobacco manufacturing industries of the United States 
continue to expand as they have during the past two decades, 
it is probable that a larger proportion of these crops may in 
the not distant future be retained for home consumption. 

(2) An increasing number of additional outside sources, 
from which Great Britain and Western Europe import food- 
stuffs, have arisen in recent years. Russia, Roumania, Bul- 
garia and Hungary, Argentina, Australia, India and Canada 
have become important grain and flour exporters, and Argen- 
tina, Brazil, Uruguay, New Zealand, Australia, Russia and 
India are exporters of livestock and meat products. The 
cotton and leaf tobacco export trades of the United States 
have been less affected by the rise of other outside sources, 
but growing quantities of cotton are being exported from 
British India, Egypt and other tropical colonies of the Euro- 
pean powers ; and of leaf tobacco from the Dutch East Indies, 
Turkey, the West Indies, the Philippines, British India, Bra- 
zil, Paraguay, Russia, Austria-Hungary and Algeria. 

(3) The policy of intensive agriculture with the resul- 


tant heavy domestic production of livestock, grain, flour, dairy 
products and vegetables in Germany, France, Austria-Hun- 
gary and some of the smaller countries of central and western 
Europe tends to restrict the exports of American foodstuffs 
by reducing the food imports of these countries to a minimum. 
(4) The high tariff duties levied on imported wheat, 
flour, livestock and numerous meat products in all the food- 
importing countries of western Europe except Great Britain, 
Denmark, Holland and Belgium tend to restrict somewhat 
the exportation of these products from the United States, and 
in some markets the import duties are supplemented by re- 
strictive inspection regulations. 

During the European War the shortage of vessel tonnage, 
high ocean freight rates, and the closing of trade routes to 
some of the continental markets prevented the free movement 
of the agricultural as well as other exports of the United 
States, but this situation was wholly abnormal. In times of 
peace, ocean freights and services to the great European mar- 
kets are usually satisfactory. The importance of ocean trans- 
portation as an obstacle to the free development of the Ameri- 
can export trade is normally confined to the trade with non- 
European countries and applies more largely to the shipment 
of manufactures than to the agricultural exports. 

The Agricultural Imports 

The early trade in West India sugar and molasses, south 
European wines and spirits, and tea, coffee and spices im- 
ported from China, India, the East and West Indies and 
South America constitutes an interesting and important chap- 
ter in the history of American commerce and extends back to 
the early colonial days.^ For many years, however, the agri- 
cultural imports as a whole were greatly exceeded by the im- 
ports of manufactures . The country was agricultural and 

*For details of early trade history see Emory E. Johnson: 
** History of the Domestic and Foreign Commerce of the United 
States,'' vol. ii 




needed to import the bulk of its manufactures from abroad. 
As late as the period 1846 to 1860, long after manufactur- 
ing industries had begun to develop in the United States, the 
agricultural imports comprised but 28 to 39 per cent, of the 
entire import trade as compared with imports of manufac- 
tures ranging from 5 6^ to 71 per cent, of the total. 

The export and import trades in agricultural commodities 
after the Civil War were similar in that both increased rap- 
idly. They differed, however, in that since the close of the 
nineteenth century the former has declined relative to ex- 
ported manufactures and the total export trade, while the 
imports of agricultural products have steadily maintained the 
relative level which they attained during the seventies and 
eighties. The total value of all agricultural imports advanced 
from $129,816,000 in 1860 to $191,559,000 in 1870, $314,- 
617,000 in 1880, $420,139,000 in 1900 and to over $815,- 
000,000 in 1913. In 1860 they comprised 36.7 per cent, of 
the value of the country's entire import trade, in 1870 43.9 
per cent., in 1880 47.1 per cent., in 1900 49.4 per cent, and 
since then have varied from 43.7 to 49.6 per cent, of the total.^ 
Meanwhile the imports of manufactures and semi-manufac- 
tures also advanced to a value of $757,500,000 in 1913 but 
declined relatively to less than 42 per cent, of the entire im- 
port trade. 

The agricultural imports include three principal groups 
of commodities. (1) The largest and most rapidly increas- 
ing group consists of raw material of agricultural origin to 
be used' in the manufacturing industries of the United States. 
In the fiscal year, 1914, hides and skins valued at $120,- 
290,000 were imported from Argentina, Russia, Canada, Mex- 
ico, Australasia, the East Indies, and from a wide range of 
other countries including even Great Britain and western 
Europe. Over 237,600,000 pounds of wool valued at $53,- 
191,000 dollars were imported in the same year, principally 
from England, acting as a broker nation for wools raised in 
many other parts of the world, and from Argentina and 
Uruguay, Australasia, China and Russia. Raw silk valued 

^U. S. Statistical Abstract (1913), p. 638. 


at $97,828,000 was imported from Japan, China, Italy, and 
France; hemp, flax, jute, sisal grass and other raw fibers 
valued at $54,350,000 chiefly from Mexico, the East Indies, 
the Philippines, and England again acting as a broker nation ; 
leaf tobacco valued at $35,029,000 chiefly from Cuba, Turkey 
and Holland; and long-staple cotton, principally Egyptian, 
valued at $19,457,000. 

The second group consists of crude foodstuffs and food 
animals, the value of which has since 1900 varied from 9 ^^^ 
to 13 3^ per cent, of the total import trade. It includes coffee, 
which is imported largely from Brazil, Colombia, Venezuela, 
Central America, Mexico, the East and West Indies and in- 
directly from various European countries; tea from Japan, 
China, the East Indies, and indirectly from England; and 
crude cocoa from the West Indies, Brazil, Ecuador, and from 
England, Portugal and other European transshipment coun- 
tries. It also includes a large and increasing volume of fruits 
and nuts which are imported from the West Indies, Central 
and South America, Mexico, Italy, France, Spain and a wide 
range of additional tropical and subtropical countries.^ The 
annual value of all foodstuffs imported in the raw condition, 
including a limited number of food animals, has since the 
year 1900 varied from $98- to $247,800,000. 

A third group of agricultural imports includes the various 
manufactured or partially prepared foods. Sugar, which is 
the largest individual import of the entire foreign trade, is 
imported to the value of $100,000,000 annually from Cuba, 
the Philippines, the Dutch East Indies, Santo Domingo and 
South America. The Department of Commerce also includes 
in this group spirits, wines and other beverages to the value 
of over $20,000,000, which are imported from France, Ger- 
many, Italy, Spain, Great Britain and other countries. It 
includes dried and preserved fruits, and in very recent 
years, limited quantities of meat products, dairy products 
and breadstuffs such as rice and wheat flour, macaroni and 
tapioca. The total annual value of all imports in this group 
has since the year 1900 ranged from $95,300,000 to $227,- 

See chap, xii, p. 243. 


f '' 





J250,000 and from lOJ to 15 1 per cent, of the entire import 
trade. The relative position of food imports — crude as well 
as prepared— has in recent years been lower than during the 
seventies and eighties, while that of raw materials of agricul- 
tural origin has steadily risen. 

Effect of Agricultural Imports on Americaii Fanners. 
—Though the volume of the imports of agricultural com- 
modities is astoundingly large their effect upon many of the 
principal farm crops and allied industries of the United States 
— grain, flour, cotton, livestock, meat products, leaf tobacco, 
dairy products, fruits and vegetables— has for various reasons 
never been serious. (1) Most of the imported commodities of 
this kind are not directly competitive and their total volume 
has thus far been relatively small. The imports of foreign 
grain, grain products, meats and livestock for food purposes, 
have always been small and were indeed until very recent 
years almost unappreciable. Certain dairy products, mainly 
of a specialized character, have been imported for some years, 
but their effect upon the vast output of the domestic dairy in- 
dustries has been restricted by their relatively small volume. 
Foreign cotton and leaf tobacco imports have been rapidly in- 
creasing but are largely non-competitive, the long-staple cot- 
ton imported from Egypt being in competition with but a 
small fraction of the American cotton crop, which consists 
mainly of short-staple varieties; and the imports of Cuban, 
Turkish and other special varieties of leaf tobacco come into 
competition with but a small part of the country's vast crop 
of domestic leaf. Much of the foreign cotton and leaf to- 
bacco is mixed with the domestic product to obtain desired 
finished wares and thereby increases rather than restricts the 
demand for American upland cotton and leaf tobacco. A wide 
range of fruits and nuts is imported, but as was described in 
an earlier chapter a large proportion consists of tropical and 
subtropical varieties which are not produced on a large scale 
in the United States. 

(2) The effects of the agricultural imports of this kind 
have been in some instances further minimized by the import 
duties which were imposed until the enactment of the tariff 


law of October, 1913, and which are still applicable to leaf 
tobacco, prepared dairy products and certain fruits. 

(3) Some of the principal imported agricultural com- 
modities are even less competitive owing to the almost com- 
plete lack of production in the United States. Such for ex- 
ample are coffee, cocoa, tea and hemp, sisal grass and similar 
fibers. The latter are produced in the United States on a 
moderate scale but the imported product has been essential 
to the twine and cordage manufacturing industries. 

Competition with domestic producers has been confined 
mainly to imported wool, hides and skins, sugar, wines and 
spirits. Foreign wool has been imported for use in the Ameri- 
can woolen industries even though protective duties were ap- 
plicable imtil December 1, 1913, because domestic wool pro- 
duction was insufficient and in part because a portion of the 
wool imports are non-competitive.^ The inadequacy of home 
production, likewise, made possible the heavy importation of 
hides and skins, and foreign cane sugar has long been in di- 
rect competition with domestic cane and sugar beet produc- 
tion. It is, moreover, probable, that since wool and hides 
and skins are placed upon the free list by the act of October, 
1913, and the duties on sugar are reduced, this competition 
may further increase. Foreign wines and spirits are also in 
competition with domestic liquors and with the raw farm 
products from which they are made, but the special demand 
upon which they depend causes them to be imported, even 
though they are restricted by heavy import duties. 

The agricultural import trade as a whole may be expected 
to increase in the future. Conditions of domestic supply and 
demand tend to affect it exactly contrary to the way they affect 
the agricultural exports. The demand for many of the im- 
ported foods, particularly those of tropical and subtropical 
growth, is steadily advancing, and the expansion of the woolen 
and cotton textile, twine, cordage, and leather industries 
points to the further importation of foreign raw materials of 
agricultural origin. Restrictive tariff duties on most agri- 
cultural imports have, more over, been either reduced or en- 

^See chap, x, p. 207. 




tirely removed, purchasing, shipping and financial methods 
are being improved, trade relations with the countries in 
which most of the agricultural imports originate are improv- 
ing, and their output is with few exceptions increasing at lea^t 
as rapidly as market conditions warrant. 


Johnson, Emory R. History of Domestic and Foreign Com- 
merce of the United States, Vol. II (1915). 

Smith, R. E. Wheat Fields and Markets of the World (1908) 

Chicago Board of Trade : Annual Report on Trade and Com- 
merce of Chicago (annual). 

United States Bureau of Crop Estimates (Department of Ag- 
riculture) : The Agricultural Outlook (Nov. 23 1914) 
pp. 20-23. . ' 

United States Bureau of Foreign and Domestic Commerce: 

Monthly Summary of Commerce and Finance. 

Statistical Abstract of United States (annual).* 
United States Commerce and Navigation Report (an- 

Utilization of Potatoes in Europe (1914). 

United States Bureau of Statistics (Department of Agricul- 
ture) : 

Cereal Production of Europe, Bulletin No. 68 (1908). 

Crop Export Movement, Bulletin No. 38 (1905). 

Foreign Restrictions on American Meat, Reprint No. 

^Grain Movement in the Great Lakes Region, Bulletin 

No. 81 (1910). 

• International Trade in Farm Products, 1901-1910 Bul- 
letin No. 103 (1913). 

^Marketing Grain and Livestock in the Pacific Coast 

Region, Bulletin No. 89 (1911). 

Meat in Foreign Markets— Tariffs of Fourteen Import- 
ing Nations and Countries of Surplus, Bulletin No. 39 

^Meat Animals and Packing House Products, Bulletin 

No. 40 (1906). 

■ Meat Supply and Surplus, Bulletin No. 55 (1907). 

■ Russian Wheat and Wheat Flour in European Markers 

Bulletin No. 66 (1908). ' 


^""'^^ toe)*^' ^""^^'^ ^^ Statistics (Department of Agricul- 
—— Russia's Wheat Surplus, Bulletin No. 42 (1906) 

No 33 0^2) ""^ *^' ^""''^^ ^'^'"" 1612-1911, c'ircular 
United States Bureau of Statistics (Treasury Department) : 

wS'"''-' t ^t'J'^^o"*^"^' ^""^ ^^^'^ Distribution 1790- 
Sll9^ Summary of Commerce and Finance, 

(See detailed bibliography in Emory R. Johnson: History 
of Domestic and Foreign Commerce of the United States, VoT 






(38 Stat. L., 693.) 

AN ACT To tax the privilege of dealing on exchanges, boardi 
of trade, and similar places in contracts of sale of cotton 
for future delivery, and for other purposes. 

Be it enacted hy the Senate and House of Representatives 
of the United States of America in Congress assemhled. That 
this Act shall be known by the short title of the "United States 
cotton futures Act." 

Sec. 2. That, for the purposes of this Act, the term "con- 
tract of sale" shall be held to include sales, agreements of sale, 
and agreements to sell. That the word "person," wherever 
used in this Act, shall be construed to import the plural or sin- 
gular, as the case demands, and shall include individuals, asso- 
ciations, partnerships, and corporations. When construing and 
enforcing the provisions of this Act, the act, omission, or 
failure of any official, agent, or other person acting for or em- 
ployed by any association, partnership, or corporation within 
the scope of his employment or office, shall, in every case, also 
be deemed the act, omission, or failure of such association, part- 
nership, or corporation as well as that of the person. 

Sec. 3. That upon each contract of sale of any cotton for 
future delivery made at, on, or in any exchange, board of trade, 
or similar institution or place of business, there is hereby levied 
a tax in the nature of an excise of 2 cents for each pound of 
the cotton involved in any such contract. 

Sec. 4. That each contract of sale of cotton for future de- 
livery mentioned in section three of this Act shall be in writing 
plainly stating, or evidenced by written memorandum showing, 
the terms of such contract, including the quantity of the cot- 
ton involved and the names and addresses of the seller and 
buyer in such contract, and shall be signed by the party to 
be charged, or by his agent in his behalf. If the contract or 
memorandum specify in bales the quantity of the cotton in- 


;l I 




volved, witliout giving the weight, each bale shall, for the pur- 
poses of this Act, be deemed to weigh five hundred pounds. 

Sec. 5. That no tax shall be levied under this Act on any 
contract of sale mentioned in section three hereof, if the con- 
tract comply with each of the following conditions: 

First. Conform to the requirernents of section four of, and 
the rules and regulations made pursuant to, this Act. 

Second. Specify the basis grade for the cotton involved in 
the contract, which shall be one of the grades for which stand- 
ards are established by the Secretary of Agriculture except 
grades prohibited from being delivered on a contract made 
under this section by the fifth subdivision of this section, the 
price per pound at which the cotton of such basis grade is con- 
tracted to be bought or sold, the date when the purchase or sale 
was made, and the month or months in which the contract is 
to be fulfilled or settled: Provided, That middling shall be 
deemed the basis grade incorporated into the contract if no 
other basis grade be specified either in the contract or in the 
memorandum evidencing the same. 

Third. Provide that the cotton dealt with therein or de- 
livered thereunder shall be of or within the grades for which 
standards are established by the Secretary of Agriculture ex- 
cept grades prohibited from being delivered on a contract made 
under this section by the fifth subdivision of this section and 
no other grade or grades. 

Fourth. Provide that in case cotton of grade other than the 
basis grade be tendered or delivered in settlement of such con- 
tract, the differences above or below the contract price which 
the receiver shall pay for such grades other than the basis 
grade shall be the actual commercial differences, determined 
as hereinafter provided. 

Fifth. Provide that cotton that, because of the presence 
of extraneous matter of any character or irregularities or de- 
fects, is reduced in value below that of Good Ordinary, or 
cotton that is below the grade of Good Ordinary, or, if tinged, 
cotton that is below the grade of Low Middling, or, if stained, 
cotton that is below the grade of Middling, the grades men- 
tioned being of the official cotton standards of the United 
States, or cotton that is less than seven-eighths of an inch in 
length of staple, or cotton of perished staple or of immature 
staple, or cotton that is "gin cut" or reginned, or cotton that 
is ''repacked" or "false packed" or "mixed packed" or "water 
packed," shall not be delivered on, under, or in settlement of 
such contract. 



Sixth. Provide that all tenders of cotton under such con- 
tract shall be the full number of bales involved therein, except 
that such variations of the number of bales may be permitted 
as is necessary to bring the total weight of the cotton tendered 
within the provisions of the contract as to weight ; that, on the 
fifth business day prior to delivery, the person making the ten- 
der shall give to the person receiving the same written notice 
of the date of delivery, and that, on or prior to the date so fixed 
for delivery, and in advance of final settlement of the contract, 
the person making the tender shall furnish to the person re- 
ceiving the same a written notice or certificate stating the 
grade of each individual bale to be delivered and, by means of 
marks or numbers, identifying each bale with its grade. 

Seventh. Provide that, in case a dispute arises between the 
person making the tender and the person receiving the same, as 
to the quality, or the grade, or the length of staple, of any cot- 
ton tendered under the contract, either party may refer the 
question to the Secretary of Agriculture for determination, 
and that such dispute shall be referred and determined, and the 
costs thereof, fixed, assessed, collected and paid, in such man- 
ner and in accordance with such rules and regulations as may 
be prescribed by the Secretary of Agriculture. 

The provisions of the third, fourth, fifth, sixth, and seventh 
subdivisions of this section shall be deemed fully incorporated 
into any such contract if there be written or printed thereon, 
or on the memorandum evidencing the same, at or prior to the 
time the same is signed, the phrase, "Subject to United States 
cotton futures Act, section five." 

The Secretary of Agriculture is authorized to prescribe rules 
and regulations for carrying out the purposes of the seventh 
subdivision of this section, and his findings, upon any dispute 
referred to him under said seventh subdivision, made after the 
parties in interest have had an opportunity to be heard by him or 
such officer, officers, agent, or agents of the Department of Agri- 
culture as he may designate, shall be accepted in the courts 
of the United States in all suits between such parties, or their 
privies, as prima facie evidence of the true quality, or grade, 
or length of staple, of the cotton involved. 

Sec. 6. That for the purposes of section five of this Act 
the differences above or below the contract price which the 
receiver shall pay for cotton of grades above or below the basis 
grade in the settlement of a contract of sale for the future 
delivery of cotton shall be determined by the actual commercial 
differences in value thereof upon the sixth business day prior 

,1 ' 






to the day fixed, in accordance with the sixth subdivision of 
section five, for the delivery of cotton on the contract, estab- 
lished by the sale of spot cotton in the market where the future 
transaction involved occurs and is consummated if such mar- 
ket be a bona fide spot market; and in the event there be no 
bona fide spot market at or in the place in which such future 
transaction occurs, then, and in that case, the said differences 
above or below the contract price which the receiver shall pay 
for cotton above or below the basis grade shall be determined 
by the average actual commercial differences in value thereof, 
upon the sixth business day prior to the day fixed, in accordance 
with the sixth subdivision of section five, for delivery of cotton 
on the contract, in the spot markets of not less than five places 
designated for the purpose from time to time by the Secretary 
of Agriculture, as such values were established by the sales of 
spot cotton, in such designated five or more markets : Provided, 
That for the purposes of this section such values in the said 
spot markets be based upon the standards for grades of cotton 
established by the Secretary of Agriculture: And provided 
further. That whenever the value of one grade is to be deter- 
mined from the sale or sales of spot cotton of another grade 
or grades, such value shall be fixed in accordance with rules 
and regulations which shall be prescribed for the purpose by the 
Secretary of Agriculture. 

Sec. 7. That for the purposes of this Act the only markets 
which shall be considered bona fide spot markets shall be those 
which the Secretary of Agriculture shall, from time to time, 
after investigation, determine and designate to be such, and 
of which he shall give public notice. 

Sec. 8. That in determining, pursuant to the provisions 
of this Act, what markets are bona fide spot markets, the Sec- 
retary of Agriculture is directed to consider only markets in 
which spot cotton is sold in such volume and under such con- 
ditions as customarily to reflect accurately the value of mid- 
dling cotton and the differences between the prices or values 
of middling cotton and of other grades of cotton for which 
standards shall have been established by the Secretary of Agri- 
culture: Provided, That if there be not sufficient places, in 
the markets of which are made bona fide sales of spot cotton 
of grades for which standards are established by the Secretary 
of Agriculture, to enable him to designate at least five spot 
markets in accordance with section six of this Act, he shall, 
from data as to spot sales collected by him, make rules and 
regulations for determining the actual commercial differences 



in the value of spot cotton of the grades established by him 
as reflected by bona fide sales of spot cotton, of the same or 
different grades, in the markets selected and designated by him, 
from time to time, for that purpose, and in that event, 
differences in value of cotton of various grades involved in 
contracts made pursuant to section five of this Act shall 
be* determined in compliance with such rules and regula- 
tions. . 1 . 1 
Sec. 9. That the Secretary of Agriculture is authorized, 
from time to time, to establish and promulgate standards of 
cotton by which its quality or value may be judged or de- 
termined, including its grade, length of staple, strength of 
staple, color, and such other qualities, properties, and conditions 
as may be standardized in practical form, which, for the purposes 
of this Act, shall be known as the "Official cotton standards of 
the United States," and to adopt, change, or replace the standard 
for any grade of cotton established under the Act making appro- 
priations for the Department of Agriculture for the fiscal year 
ending June thirtieth, nineteen hundred and nine (Thirty-fifth 
Statutes at Large, page two hundred and fifty-one), and Acts 
supplementary thereto : Provided, That any standard of any cot- 
ton established and promulgated under this Act by the Secretary 
of Agriculture shall not be changed or replaced within a period 
less than one year from and after the date of the promulga- 
tion thereof by the Secretary of Agriculture : Provided further. 
That, subsequent to six months after the date section three of 
this Act becomes effective, no change or replacement of any 
standard of any cotton established and promulgated under this 
Act by the Secretary of Agriculture shall become effective until 
after one year's public notice thereof, which notice shall specify 
the date when the same is to become effective. The Secretary 
of Agriculture is authorized and directed to prepare practical 
forms of the official cotton standards which shall be established 
by him, and to furnish such practical forms from time to time, 
upon request, to any person, the cost thereof, as determined by 
the Secretary of Agriculture, to be paid by the person request- 
ing the same, and to certify such practical forms- under the 
seal of the Department of Agriculture and under the signa- 
ture of the said Secretary, thereto affixed by himself or by some 
official or employee of the Department of Agriculture thereunto 
duly authorized by the said Secretary. 

Sec. 10. That no tax shall be levied under this Act on any 
contract of sale mentioned in section three hereof, if the con- 
tract comply with each of the following conditions: 



!' .", 't 

First. Conform to the rules and reflations made pursuant 
to this Act. 

Second. Specify the grade, type, sample, or description of 
the cotton involved in the contract, the price per pound at 
which such cotton is contracted to be bought or sold, the date 
of the purchase or sale, and the time when shipment or de- 
livery of such cotton is to be made. 

Third. Provide that cotton of or within the grade or of the 
type, or according to the sample or description, specified in 
the contract shall be delivered thereunder, and that no cotton 
which does not conform to the type, sample, or description, or 
which is not of or within the grade, specified in the contract 
shall be tendered or delivered thereunder. 

Fourth. Provide that the delivery of cotton under the con- 
tract shall not be effected by means of "set-off'' or "ring" set- 
tlement, but only by the actual transfer of the specified cotton 
mentioned in the contract. . 

The provisions of the first, third, and fourth siAdivisions 
of this section shall be deemed fully incorporated into any such 
contract if there be written or printed thereon, or on the docu- 
ment or memorandum evidencing the same, at or prior to the 
time the same is entered into, the words "Subject to United 
States cotton futures Act, section ten." 

This Act shall not be construed to impose a tax on any sale 
of spot cotton. 

This section shall not be construed to apply to any contract 
of sale made in compliance with section five of this Act. 

Sec. 11. That upon each order transmitted, or directed or 
authorized to be transmitted, by any person within the United 
States for the making of any contract of sale of cotton grown 
in the United States for future delivery in cases in which the 
contract of sale is or is to be made at, on, or in any exchange, 
board of trade, or similar institution or place of business in 
any foreign country, there is hereby levied an excise tax at 
the rate of 2 cents for each pound of the cotton so ordered to 
be bought or sold under such contract: Provided, That no 
tax shall be levied under this Act on any such order if the 
contract made in pursuance thereof comply either with the con- 
ditions specified in the first, second, third, fourth, fifth, and 
sixth subdivisions of section five, or with all the conditions 
specified in section ten of this Act, except that the quantity of 
the cotton involved in the contract may be expressed therein in 
terms of kilograms instead of pounds. 

Sec. 12. That the tax imposed by section three of this Act 



shall be paid by the seller of the cotton involved in the contract of 
sale, by means of stamps which shall be affixed to such contracts, 
or to the memoranda evidencing the same, and canceled in com- 
pliance with rules and regulations which shall be prescribed 
by the Secretary of the Treasury. The tax imposed by section 
eleven of this Act shall be paid by the sender of the order and 
collected in accordance with rules and regulations which shall 
be prescribed by the Secretary of the Treasury. 

Sec. 13. That no contract of sale of cotton for future de- 
livery mentioned in section three of this Act "which does not 
conform to the requirements of section four hereof and has not 
the necessary stamps affixed thereto as required by section 
twelve hereof shall be enforceable in any court of the United 
States by, or on behalf of, any party to such contract or his 
privies. That no contract of sale of cotton for future delivery, 
made in pursuance of any order mentioned in section eleven of 
this Act, shall be enforceable in any court of the United States 
by or on behalf of any party to such contract or his privies un- 
less it conforms to the requirements of section four hereof and 
the tax imposed by section eleven upon the order for such con- 
tract shall have been paid in compliance with section twelve of 
this Act. 

Sec. 14. That the Secretary of the Treasury is authorized 
to make and promulgate such rules and regulations as he may 
deem necessary to collect the tax imposed by this Act and 
otherwise to enforce its provisions. Further to effect this pur- 
pose, he shall require all persons coming within its provisions 
to keep such records and statements of account as will fully 
and correctly disclose all transactions mentioned in sections 
three and eleven of this Act; and he may appoint agents to 
conduct the inspection necessary to collect said tax and other- 
wise to enforce this Act and all rules and regulations made 
by him in pursuance hereof, and may fix the compensation of 
such agents. 

Sec. 15. That any person liable to the payment of any tax 
imposed by this Act who fails to pay, or evades or attempts to 
evade the payment of such tax, and any person who otherwise 
violates any provision of this Act, or any rule or regulation 
made in pursuance hereof, shall be deemed guilty of a misde- 
meanor, and, upon conviction thereof, shall be fined not less 
than $100 nor more than $20,000, in the discretion of the court; 
and, in case of natural persons, may, in addition, be punished 
by imprisonment for not less than sixty days nor more than 
three years, in the discretion of the court. 


' i 

• I 









Sec. 16. That in addition to the foregoing punishment 
there is hereby imposed, on account of each violation of this 
Act, a penalty of $2,000, to be recovered in an action founded 
on this Act in the name of the United States as plaintiff, and 
when so recovered one-half of said amount shall be paid over 
to the person giving the information upon which such recovery 
was based. It shall be the duty of United States attorneys, to 
whom satisfactory evidence of violations of this Act is fur- 
nished, to institute and prosecute actions for the recovery of 
the penalties prescribed by this section. 

Sec. 17. That no person whose evidence is deemed material 
by the office prosecuting on behalf of the United States in any 
case brought under any provision of this Act shall withhold 
his testimony because of complicity by him in any ^violation 
of this Act or of any regulation made pursuant to this Act, 
but any such person called by such officer who testifies in 
such case shall be exempt from prosecution for any offense to 
which his testimony relates. 

Sec. 18. That the payment of any tax levied by this Act 
shall not exempt any person from any penalty or punishment 
now or hereafter provided by the laws of any State for entering 
into contracts of sale of cotton for future delivery, nor shall 
the payment of any tax imposed by this Act be held to prohibit 
any State or municipality from imposing a tax on the same 

Sec. 19. That there is hereby appropriated, out of any 
moneys in the Treasury not otherwise appropriated, for the 
fiscal year ending June thirtieth, nineteen hundred and fifteen, 
the sum of $50,000 or so much thereof as may be necessary 
to enable the Secretary of the Treasury to carry out the pro- 
visions of this Act. 

Sec. 20. That there is hereby appropriated, out of any 
moneys in the Treasury not otherwise appropriated, available 
until expended, the sum of $150,000 or so much thereof as may 
be necessary to enable the Secretary of Agriculture to make 
such investigations, to collect such data, and to use such meth- 
ods and means as he may deem necessary to determine and 
designate what are bona fide spot markets within the meaning 
of this Act, to prescribe rules and regulations pursuant to sec- 
tions five, six, and eight hereof, to establish and promulgate 
standards for cotton and to furnish practical forms thereof as 
authorized by section nine hereof, to publish the results of his 
investigations, to pay rent and to employ such persons as he 
may deem necessary, in the city of Washington and elsewhere. 



The Secretary of Agriculture is hereby directed to publish from 
time to time the results of investigations made in pursuance of 
this Act. All sums collected by the Secretary of Agricul- 
ture as costs under section five, or for furnishing practical 
forms under section nine of this Act, shall be deposited and 
covered into the Treasury as miscellaneous receipts. 

Sec. 21. That sections nine, nineteen, and twenty of this 
Act and all provisions of this Act authorizing rules and regu- 
lations to be prescribed shall be effective immediately. All 
other sections of this Act shall become and be effective on and 
after six months from the date of the passage of this Act: 
Provided, That nothing in this Act shall be construed to apply 
to any contract of sale of any cotton for future delivery men- 
tioned in section three of this Act which shall have been made 
prior to the date when section three becomes effective. 

Approved, August 18, 1914. 



Agricultural commerce, 1 

Agricultural crops, classification 
^ of, 4 

Agricultural markets and proc- 
esses, classification of, 12 

Agricultural produce, insurance 
of. See Insurance 

Agricultural produce growers ' 
local markets for, 12 

Animal products of farms, value 
of, 8. See also Livestock 

Auction sales of produce, 21 

Barley, local trade in. See Local 

receipts and shipments of, at 

primary and seaboard 

markets, 52 
Bill of lading, liability clause in, 

uses of, 42, 121, 325, 335, 337' 
Bucket shops, 151 
Burley district for leaf tobacco, 


Cattle, feeding grounds for, 165 
Cattle growing, extent of, 164, 

166. See also Livestock 
Central markets, for cotton, 116, 
for grain, 31 
for livestock, 166, 181, 182, 

185, 186, 187 
for wool, 212, 213, 214 
trade organization of, 19 
wholesale, 13, 14 
See also Primary Markets 
Cigar tobacco. See Tobacco, ci- 
Cold storage, effect of, on prices, 

Combination and consolidation, 
effect of, on prices, 356 

Commerce, defined, 2 
in farm products, 10 
study of, subdivided, 2 
Commercial costs, effect of, on 

prices, 360 
Commission houses, American, 

26, 44, 84, 85, 251 
Competition, at central livestock 
markets, 182, 184 
extent of, between central cot- 
ton markets, 123 
between primary grain mar- 
kets, 55 
of foreign and domestic 
wool, 207 
Concentration points for cotton, 

functions of, 123, 124 
Confirmed bankers' credit, 337 
Consumers ' leagues, 25 
Contracts, types of, used by 
country elevators in sell- 
ing grain, 86 
Cooperative associations, 48, 55, 
57, 108, 178, 207, 217, 255 
Corn crop, receipts and ship- 
ments of, at primary and 
seaboard markets, 52 
size of, 32, 33 
use of, for feeding stock, 32 
Corners, nature and effect of, on 

prices, 161, 355 
Cost of transportation, as a fac- 
tor influencing grain 
prices, 88, 91, 113, 132, 
199, 219 
See Transportation, charges 
Cotton, advances on, to growers, 
104, 107 
classification of, 95, 97 
consumers of, number of, 94 
consumption of, by southern 

mills, 106, 118 
cost of production of, 109 




Cotton, exports of, 116 

effect of. Cotton Futures Act 
on dealings in, 112 
future contracts on the price 
of, 133 
factors affecting future and 
central market prices of, 
grades of, 273 

grading and inspection of, 270, 
271, 281 
forms for, in New York, 
growers of, number of, 94 
hauling of, 102 
limits for buying, 112, 114 
loans on, 104, 105, 333 
local handling of, 94, 100, 102 
marking and tagging of, 119 
New York grading system for, 

ocean freight rates on, 132 
price of, 109, 110, 111, 114, 

effect of future contracts 
on, 111 
price differences in, 146-148 
purchase of, at concentration 

points, 124 

sales of, to domestic mills, 126 

to foreign buyers, 108 

in foreign markets, 129, 130 

by growers, to exporting 

houses and brokers, 105, 


to local merchants, 104 

tare rules relating to, 113, 130 

through bills of lading for, 

time of sale of, to northern 

mills, 128 
types of contracts used in sell- 
ing, at concentration 
points, 124 
world's production of, 98, 99 
Cotton acreage, 95, 96, 109 
Cotton bailing, 100, 101 
Cotton competition between cen- 
tral markets, 123 
Cotton compressing, 120, 121 
Cotton concentration points, 106, 

122, 123 
Cotton crop, extent of, 94-96, 

Cotton exchanges. See Ex- 

Cotton future contracts. See Fu- 
ture contracts 
Cotton Futures Act, effect of, on 
dealings, 144, 147, 159 
text of, 142, 389 
Cotton ginning, 100, 101 
Cotton gins, number of, 94 
Cotton-growing belt, 94 
Cotton hedging. See Hedging 
Cotton insurance, 121 
Cotton-receiving ports, 125, 126 
Cotton spot sales in New York, 

Cotton storage places, number 

of, 94 
Country grain elevator. See Ele- 
Credit, farm, shortcomings of, 329 
long-term mortgage, 327 
rural, 327-329 
Crop reports, collection and dis- 
semination of, 293, 301 
government, 294, 295, 298 

purpose of, 294 
private, 302 
state, 301 

township, county and special 
correspondents for, 295 
Crop-moving funds, flow of, 338 
Crops, Bureau of Foreign and 
Domestic Commerce, re- 
ports on, 301 
census figures on, 299 
classification of, 4 
financing of, 327 
primary, 5, 6, 7 
production of, quantity mar- 
keted, and farm value of, 
proportion of, shipped out of 
county where grown, 6 
Cyclone insurance. See Insurance 

Dark tobacco. See Tobacco, dark 
Dealers^ loans on produce, 332 
Differences in cotton, 111 
Distribution and production dis- 
tinguished, 1 
Documentary bill of exchange, 337 
Domestic animals on farms, 

value of, 8, 9 
Domestic trade settlements, 335 



Elevators, country, classification 
of, 40 
country grain, 29, 38, 39, 40- 

45, 84 
daily reports of shipments of 

grain by, 68 
federal regulation of, 78 
functions of, 29 
regulation of, by the ex- 
changes, 74-78 
by the state, 65 
terminal, 50, 61-63, 67 
functions of, 62 
ownership of, 63 
report of receipts and ship- 
ments at, 70 
sale of grain stored in, 86 
sources of profit of, 78 
transfer of grain from grower 

to, 36 
warehouse receipts for grain 
in, 71, 74 
Exchange, bills of, 337 
Exchanges, clearing house for 
settling contracts on, 139 
corporate and business organi- 
zation of, 137-139 
effect of, on prices, 111, 160 
functions of, 20, 151-158 
influence of, on the sale of 

farm produce, 136 
for livestock, 188, 189 
membership in, 138 
regulation of terminal eleva- 
tors by, 74 
sale of grain on seaboard, 87 
for tobacco, 231, 232 
Export tobacco. See Tobacco, 

Export settlements, 336 
Export trade, influences on, 378 
unfavorable influences on, 
Exporting concerns, types of 

American, 25 
Exporting houses, purchase from 
growers of cotton by, 105 
methods of, 25 
Exports, of agricultural prod- 
ucts, history of, 368 
of cotton, 116, 118 
European markets for, 376 
of food, 274 
foreign markets for, 276 

Exports, of fruit. See Fruit, ex- 
ports of 
of grain, 87 
history of, 368-375 
of livestock, 186 
non-European markets for, 378 
other than food, 375 
of Tobacco. See Tobacco, ex- 
ports of 

Farm animals, insurance of. 
See Insurance and Live- 
Farm credits, shortcomings of, 

Farmers ' cooperative elevators. 

See Elevators 
Financial settlement, methods 

of, 325, 335 
Financing the crops, 154, 327, 

Fire insurance. See Insurance 
Foreign commerce, in farm prod- 
ucts, 10 
in tobacco. See Tobacco, for- 
eign trade in 
See also Exports and Imports 
Fruit growers' cooperative asso- 
ciations, 255 
Fruit-growing districts, 239 
Fruits, citrus, 242 
classes of, 239 
classes of markets for, 248 
direct sales of, by growers, 253 
distribution of, in wholesale 

markets, 250 
exports of, 249 
grading of, 244 
importation of, 243 
local dealers in, 250 
marketing of, 239, 246, 250, 

non-citrus and sub-tropical, 

orchard, 239, 241 
preparation of, for market, 

244, 245 
refrigeration of, 246 
retailing of, 254 
small, 240 
warehouses for, 249 
Future contracts, cotton, abnor- 
mal discounts in the price 
of, 114 



Future contracts, copy of, 141 
effect of Cotton Futures Act 

on, 144 
influence of, on cotton 

prices, 111, 131, 133 
nature of, 145 
price differences in, 146 
definition of, 140 
delivery on, 149 
form of, for wheat, 144, 145 
law governing, 142, 150 
as a means of insurance, 155- 

nature of, in grain market, 

in produce, 21, 136, 140 
settlement of, 150 

General business conditions, ef- 
fect of, on prices, 362 
Gold production, effect of, on 

prices, 347 
Government crop reports. See 

Crop reports 
Grades, of cotton. See Cotton, 
grade of 
of fruit. See Fruit, grading 

of grain deliverable on future 

contracts, 148 
of leaf tobacco, 223 
of wheat, 268-270 
of wool, 287-289 
Grading, functions of, 259 
of tobacco. See Tobacco, 

grading of 
organization of, 261 
Grading and inspection, of cot- 
ton. See Cotton, grading 
and inspection of 
of grain. See Grain, grading 

and inspection of 
of livestock. See Livestock, 
grading and inspection of 
of wool. See Wool, grading 
and inspection of 
Grain, certificate of custodian 
department for, 77 
classes of, 267 
competition between primary 

markets for, 55, 57 
condition of cars carrying, 69 
construction and capacity of 
terminal elevators for, 62 

Grain, country elevators for. See 

daily report of shipments of, 
by elevators, 68 

exports of, 87 

farmers' cooperative elevators 
for. See Elevators 

federal regulation of elevators 
for, 78 

form of warehouse receipt for, 

functions of terminal elevators 
for, 62 

grades of, 268 

grading and inspection of, 

handling of, in sacks on Pa- 
cific Coast, 47 

inspection and grading of, 

line elevators for. See Eleva- 
. loans on, 332 

local market for. See Local 
dealers' elevators for. See 

mixing of, in elevators, 82 

ownership of terminal eleva- 
tors for, 63 

prices of, at the seaboard, 89 
factors influencing, 88, 91 
in the primary markets, 88, 

primary and seaboard markets 
for. See Primary mar- 
kets. Seaboard markets 

railroad certificate for, 81 

receipts and shipments of, at 
primary markets, 52-55, 70 
at seaboard markets, 52 

reinspection of, 266 

terminal elevator system for. 
See Elevators 

trade in, geographical distri- 
bution of, 30 

types of contracts used in sell- 
ing, by country elevators, 

warehouse system for, 29 
receipts for, 71, 79, 83 

weight certificate for, 69, 76 
Grain elevators. See Elevators 
Grain exchanges. See Exchanges 






Grapes, 242 

Growers' local prices. See 

Growers' sales, kinds of, 17, 18 

Hedging, advantage of, 154 
in cotton, 110, 130, 157, 158 
effect of Cotton Futures Act 

on, 112, 159 
in grain, 43, 82, 156, 157 
place of, in crop financing, 324 
use of, for insuring trade prof- 
its, 155-158 
Hog-raising area, 167 
Hogs, number of, in United 
States, 167 

Import business, Americp.n con- 
sumers in, 27 
Import commission houses, Amer- 
ican, 27 
Import duties, effect of, on 

prices, 360 
Import settlements, 336 
Imported wool, purchase of, 217, 

Importing methods, 25, 26 
Imports, of agricultural prod- 
ucts, 381 
effect of, on farmers, 384 
of fruits, 243 

of tobacco. See Tobacco, im- 
ports of 
of wool, 204 
reason for, 208 
Index numbers of wholesale 
prices, 342, 343, 346, 348 
Inspection, functions of, 259 
" and grading, of grain. See 
Grain, inspection and 
of produce, 259 
of grain leaving terminal ele- 
vator, order for, 72 
of livestock, 174, 175, 177, 

191, 195 
organization of, 261 

See also Grading and in- 
Inspection tags, certificates and 
labels for livestock, 192- 
Insurance of agricultural prod- 
uce, 308 

Insurance of agricultural prod- 
uce, as a basis for loans, 

certificate of, 312 

of commodities, 313, 314, 315' 

of cotton, 121 

of livestock, 309 

of rural crops, 308 

of shipments, while in trans- 
portation, 315, 317, 320, 
322, 323 

of trade profits by future con- 
tracts, 155-158 

types of companies writing, 
310, 311 

against various perils, 309 

under war risk policy, 324 

Leaf tobacco. See Tobacco 
Lightning insurance. See Insur- 
Line elevators. See Elevators 
Livestock, central markets for. 
See Central markets 

cooperative associations for 
shipping, 178 

costs of marketing, 190 

eastern cities' supply of, 183 

exports of, 185 

grading of, 286 

inspection of. See Inspection 

insurance of. See Insurance 

local market for. See Local 

prices of, influences affecting, 
184, 185,. 197, 198 

private sales of, 179, 180 

ranges for, 205 

receipts and shipments of, at 
central markets, 183 

retail sales of. See Eetail sales 

selling of, through commission- 
men, 177, 190 
to local dealers, slaughter- 
ers and re^ilers, 179 

trade in, geographical classi- 
fication of, 164, 165 

transportation of, 170, 171, 
172, 173 

yards for, 187-189 
liivestock exchanges. See Ex- 
Livestock industries, magnitude 
of, 8, 9, 168 



Loans, on agricultural products, 
104, 105, 107, 178, 328, 
332, 333, 334 
cold storage warehouse, 334 

Local buying of woo), 215, 216, 

Local grain dealers' elevators. 
See Elevators 

Local haul, length and cost and 
methods of, 36, 37 

Local markets, for agricultural 
products, 12, 19, 29, 30, 
40-46, 94-109, 176-179, 
215-217, 228-234 

Local trade, in barley, distribu- 
tion of, 36 
in corn, distribution of, 32 
in oats, distribution of, 34 
in wheat, distribution of, 30, 

Manipulation, effect of, on 

prices, 91, 355 
Marine cargo and freight poli- 
cies, 322 
Marine cargoes, insurance of. 

See Insurance 
Marine losses, 320, 321 
Marketing of fruit. See Fruit, 

marketing of 
Marketing processes, classifica- 
tion of, 16 
Markets, central, local, primary, 
retail, secondary, whole- 
sale. See under the re- 
spective headings. Central, 
Local, etc. 
central wholesale. See Central 

wholesale markets 
classification of agricultural, 12 
foreign, 368 

See also Exports 
municipal. See Municipal 
for tobacco. See Tobacco, 

wholesale. See Wholesale mar- 
Meat products, federal inspection 
labels and certificates for, 
194, 195, 196 
Milling-in-transit of grain, 59 
Mortgage credits, long-term, 

Municipal markets, 22, 24, 255 

Oats, foreign trade in, 34 
local trade in. See Local 
trade receipts and ship- 
ments of, at primary and 
seaboard markets, 52 

Office inspection system for 
gram, 263 

Options distinguished from fu- 
ture contracts, 151 

Orchard fruits. See Fruits, or- 

Organization of inspecting and 
grading. See Inspection 
and grading 

Oriental letter of credit, 337 

Packing of fruit. See Fruit, 

packing of 
Perique tobacco. See Tobacco, 

Price, of agricultural commodi- 
ties. See under head of 

various commodities and 

under Prices 
of cotton. See Cotton, price of 
** Price differences'' in cotton 

future contracts, 146, 147, 

Prices, effect of, various factors 

of, 160, 350, 354, 355, 356, 

357, 358, 360, 362 
factors influencing, in general, 

160, 350-362 
of grain, factors influencing, 

See also Grain 
of livestock. See Livestock, 

prices of 
of produce, 341, 343, 344, 346, 

retail. See Retail prices 
of tobacco. See Tobacco, leaf 
wholesale, of various classes of 

products, 343, 344, 346, 

of wool. See Wool, prices of 
Primary markets, competition be- 
tween, 55, 57 
functions of, 56 
for grain, location of, 50, 

prices of, for grain, 88, 89 
purchase and sale of grain at, 




Primary markets, volume of busi- 
ness of, relative importance 
and receipts and ship- 
ments of, 52, 54 

Production and distribution dis- 
tinguished, 1 

'*Puts," 151 

Railroad certificate for grain, 81 
Railroad rates. See Transporta- 
tion charges 
Railroad shipments, insurance of. 

See Insurance 
Regulation, of elevators, by ex- 
changes, 75-78 
by the federal government, 

by the states, 65, 66 
of tobacco warehouses, 231, 
232 ' 

Reports on crops. See Crop re- 
Retail markets, 16, 254 
Retail prices in general, 364 
Retail sales, of fruit. See Fruit, 
retailing of 
of livestock, 23 
of produce, 23 
Rural commercial credits, short- 
term, 328 
Rural credit, 327 

See also Loans 
Rural insurance. See Insurance 
Rye, receipts and shipments of, 
at primary and seaboard 
markets, 52 

Sales, retail. See Retail sales of 

produce. Auction sales of 

produce, Spot transactions 

in produce, etc. 
Seaboard and primary grain 

markets, 50, 52, 60, 61 
Seasonal flow of funds, 338 
Settlements, financial, methods 

of, 335, 336 
Sheep. See Livestock 
number of, 168, 169 
Sheep-growing districts, 167, 

Short- selling, effect of, on prices, 

in the produce market, 149 
Small fruits. See Fruits, smaU 

Speculation, effect of, on prices, 
160, 354 
functions of, 151, 153, 154 
See also Future contracts 

Spot transactions in produce, 20, 
84-88, 124, 125, 126, 140, 
152, 153, 189, 218, 229, 

State inspection and grading. 
See Inspection and grad- 

''Straddles," 151 

Sub-tropical fruits. See Fruits, 

Sun-cured tobacco. See Tobacco, 

Tare rules relating to cotton, 113 
Tariff, effect of, on commodities 
and prices, 90, 207, 219, 
236, 384-385 
Terminal elevator. See Eleva- 
Terminal markets for grain, 51 
Tobacco, bright yellow and ex- 
port, 227 
burley, and dark, 226 
cigar, types of, 223, 228 
exports of, 235 
grades of, 223, 290 
imports of, 235 
inspection of, 232 
loans on, 333 
methods of selling, 228, 230, 

middlemen in, 229 
perique, 228 
price of, 235, 237 
smoking, chewing, snuff and 
export, methods of selling, 
southern buyers of, 234 

markets for, 233 
sun-cured, 227 
trade in, 222 

types, districts, output and 
prices of, 222, 223, 224, 
warehouse receipts for, 232 
Tobacco crop, extent of, 222 
Tobacco districts, 223, 225, 

Transportation of livestock, 171, 




Transportation charges, 59, 113, 
132, 172, 191, 214, 219, 
effect of, on prices, 88, 99, 
113, 132, 199, 219, 358 

Tornado insurance. See Insur- 

United States Cotton Futures 
Act, text of, 142, 389 
Sec also Cotton Futures Act 

Visible supply, 301, 302, 303, 
304, 305 

Warehouse receipts for grain. 
See Grain, warehouse re- 
ceipts for 
Warehouses, cold storage, 247, 
for cotton, 109, 123, 124 
for fruit. See Fruit, ware- 
houses for 
functions of country, 29 
Warehouse system for grain. Sec 
Grain, warehouse system 
War risk insurance, 324 
Weighing department, Chicago 

Board of trade, 76 
Weight certificate for grain, 69, 

Wheat, central markets for. See 
Central markets 
exports of, 30 

future contract for. See Fu- 
ture contract 
geographical distribution of 

local trade in, 30, 31 
proportion of, shipped out of 
country w^here grown, 32 
receipts and shipments of, at 
primary and seaboard 
markets, 52 
See also Grain 
Wheat-growing area, 30, 31 

Wholesale market. See Centra* 

for fruit, 250 
Wholesale market transactions, 

secondary, 22 
Wholesale prices, 341, 343, 354, 

index numbers of, 342, 343, 
346, 348 
Wholesale secondary markets, 

Windstorm insurance. See Insur- 
Wool, Boston classification of, 

central markets for, 212, 213, 

competition in, between for- 
eign and domestic, 207 

consignment of, to central 
commissionmen, 216 

cooperative selling of, 217 

cost of production of, 209, 210 

distribution of, among the in- 
dustries, 211 

factors affecting supply of, 

geographical classes of, 287 

grading of, 203, 287 

imports of, 204, 206, 207, 217 

loans on, 333 

local purchasing of, 215, 216, 

methods of selling, 215 

Pacific Coast markets for, 214 

price of, 218, 219 

production of, 202, 203, 204, 

purchases of, by manufactur- 
ers direct, 217 

railroad rates on, 214 

shrinkage of, 208 

supply and distribution of, 
202, 205 
Wool market, 202 
Wool trade, peculiarities of, 202 





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